No-one really wants to think about themselves or their loved ones getting older or incapacitated, but as the saying goes, time stands still for no man. It’s important to plan for the future as the unforeseen costs of social care can be financially and emotionally crippling.
Northern Ireland residents who have savings, investments and/or property with a value that is greater than £23,250 will be deemed able to meet the full cost of their residential or nursing care. They will therefore not be eligible for financial assistance from their local authority. One of the biggest concerns for these individuals and their families is that they will have to sell their home to cover the costs of their care. Erosion of their children’s inheritance is also a weighty concern with the Government’s proposed cap on costs further away than ever and gaps still remaining in relation to the costs associated with accommodation and food.
After a homeowner has spent a period of 12 weeks in a residential or care home, their own home may be counted as capital, with a few exceptions, for example if your spouse or civil partner, a close relative aged 60 or over, or a child in your care aged under 16 still live there.
So what can you do to plan for your future and protect your home and savings?
Speak to a solicitor with experience in this area of law. He or she will help you to identify the options open to you to enable you to plan ahead. A number of measures can be explored to manage your personal finances and assets effectively as part of wider wealth management plan. Options to consider include the following:
- Make a Will
This will enable you to plan your inheritance to address how your assets will be distributed after your death. Wills should be reviewed and amended regularly as your personal circumstances change.
- Enduring Power of Attorney
This means that you identify and entrust someone to manage your financial affairs in the event of mental incapacity. This negates the need to apply to Court for an Order appointing a Controller.
- Trusts
Setting up a trust is very common in the UK. This is a means of transferring ownership of your home or other assets to someone else, whilst you are still alive. Be aware that by such an act you will no longer own the asset, therefore specialist legal advice should be sought prior to implementation. It is common for such vehicles to be scrutinised by creditors for legitimacy, purpose and intent. A trust by no means guarantees protection from creditors and you should be wary of any company promising otherwise.
- Gifting
You can also give money or assets to your children or other family members as tax free gifts during your lifetime. It should be borne in mind that if these gifts are made within the seven years prior to your death they will be treated as a Potentially Exempt Transfer and the recipient may be liable to pay Inheritance Tax on the amount. If you gift the asset but continue to derive any benefit from it, then you will fall foul of the rule regarding ‘Gifts With Reservation’. Any gift should only be made with the benefit of wider financial and legal Estate and Wealth Planning advice.
It’s vital to note that these measures should not be used as strategies to deliberately deprive yourself of capital so as to avoid care home fees – it is in fact illegal to transfer ownership of your home to deliberately avoid paying care home fees, and if proven the costs of your care can be recovered from you or the person who received your gift. The timing and motivation of the disposal of assets are of central importance and this will be considered as part of any financial means test.
- Manage your Wealth
Manage your wealth so that it is invested in income producing assets which can be directed to discharge care costs and thereby protect its capital value for the next generation. It may be feasible to rent out your home and use the income to cover your care fees or to invest savings in a buy to let property. A financial assessment should be completed and a review of all income including pensions so that an informed strategy can be implemented to bridge the gap between income and care fees which will ultimately protect capital value of assets long term.
Luke Curran & Co. Solicitors are qualified members of the Society of Trusts and Estates Practitioners (STEP), and as such we encourage our clients to be proactive in engaging with us early in life, long before there is deterioration in their health. In doing so, we can formulate a strategy and minimise the risks they are exposed to in the years to come.
Don’t wait until it’s too late.
Please contact us on 028 3026 7134 or via email to law@lukecurran.co.uk if you have any queries on Nursing Home Care Fees, Wills and Inheritance Tax Planning and we will be happy to help.
