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Protective Property Trusts
PAYMENT OF LONG TERM CARE COSTS
If you have over £22,250 in capital (savings, investments and property – including the value of your home) your Local Authority will assess you as being able to meet the full cost of your care home. If you have a property worth more than this, it may be disregarded if it is occupied by a partner, former partner or a relative. If, however, you are the only person living there, the Local Authority may force you to sell it to pay for your care.
Setting up a Protective Trust is one way of transferring the ownership of your home as seen by the Local Authority in certain circumstances.
HOW A PROTECTIVE PROPERTY TRUST WORKS
The key to the working of the Protective Property Trust is the way in which you own your property. If, like many couples, you own your property as joint tenants, when one of you dies, the property automatically passes to the survivor regardless of any provision that the deceased partner has made in their Will. In these cases, if the survivor then has to go into care, the whole of the property may have to be sold to pay for care fees.
If ownership of the property is changed from “joint tenants” to a “tenancy in common” (by a Deed of Severance), each partner then owns a share of the house (for example 50%) which they can leave to whom they like in a Will.
On the death of the first partner, the deceased partner’s share of the house is left (under the terms of the Protective Property Trust) to named beneficiaries (for example, children). At the same time the terms of the Trust allow the surviving partner to continue living in the house rent free for the rest of their life.
If the surviving partner then has to go into care, the deceased partner’s share of the house cannot be assessed for care fees as it does not belong to the surviving partner (it belongs to the Trust). Although the Local Authority could make a claim against the surviving partner’s half share, a market valuation may result in a “nil valuation” meaning that the Local Authority would disregard the whole property when assessing liability for care costs.
The beneficiary under the Trust will inherit that share on the death of the second partner. If the second partner has named the same beneficiaries in their Will, then they will inherit the whole of the Property.
FLEXIBILITY
The terms of a Protective Property Trust can provide for flexibility so that the person living in the property after the death of the first partner has the ability to move house, for example, to a smaller property and the terms of the Trust will then apply to the new property. The Trust can even provide for the property to be sold and the interest from the deceased partner’s capital share could be used to provide an income to the surviving partner.
LIMITATIONS
A Protective Property Trust will not protect the house from being used to pay for care fees if both partners have to go into care. As the Trust is incorporated in a Will, it is only activated on the death of the first partner.
In addition, although there are many benefits to Protective Property Trust, it is important that these are considered in the context of ensuring your own financial security and peace of mind for your future. Given the scenario of your partner having already died and you needing care, you should consider all your options. For example, you may prefer to receive care at home or you may think that the most appropriate option is to pay for the best possible care home that you can afford, even though you may have to sell your house to do so. If this is how you feel, a Protective Trust Will is probably not appropriate for you. It is also possible for Local Authorities to seek to challenge dispositions of property.
For further information and legal advice on Protective Property Trusts, please contact the Private Client Team at Rubric Lois King Solicitors on 0121 453 5133.
This material is published for the information of clients. It provides only an overview of the regulations in force at the date of the publication and no action should be taken without consulting the legislation or seeking professional advice. No responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the firm.
