Table of Content
- How to plan for care home fees in Scotland
- Read about the different ways to pay for your care costs
- UK Care Guide - A trusted resource, as seen on
- Care home fees and putting your house in trust
- Form a Life Estate
- Which? Money podcast: what does a weak pound & higher interest rates mean for borrowing and mortgages?
An immediate care annuity is an option that can give you peace of mind. Essentially, it is an insurance policy that covers your care fees for the rest of your life by providing you with a guaranteed lifetime income. Something else older people needing to cover care costs may be considering is putting their home into a Trust. If you put house into Trust, you can assign ownership of your property to somebody else such as your children.
We always suggest taking legal advice before you do this, to check it’s right for you. The good news for individuals requiring care and their families is that there are plenty of funding options on the table – provided the financial aspect of care is considered early enough. The sooner provisions are made, the more flexible options you have. The value of the assets that were given away is called ‘notional capital’. Essentially a trust is something that is legally recognised and can be enforced by a court of law.
How to plan for care home fees in Scotland
These type of trusts are marketed as a guaranteed way of avoiding care charges. However this is simply not the case and these kind of arrangements are, in fact, fundamentally flawed. The going rate for preparing these types of trusts is usually at least a few thousand pounds. In transferring your house into a Family Protection Trust you are disposing of an asset for no consideration. The regulations regarding financial assessment provide that a local authority can look back, as far as they wish, through any past transfers of property you may have made. If they reach the conclusion that you simply disposed of this property in an attempt to avoid care charges then they have power to simply disregard that disposal.
If you have a mortgage on your property, the equity available would be subject to what you still owe on the mortgage. You aren't responsible for any payments unless you leave the care home or sell your house. If you end up selling your house before leaving the care home, or if you leave the care home and return to your house, you must repay all outstanding debt within 56 days. This means treating you as though you still own money you’ve given away or spent. Each country in the UK allows you some savings that don’t count in your financial assessment. But under Notional Capital rules, you may have to spend this on care after all.
Read about the different ways to pay for your care costs
Always obtain independent, professional advice for your own particular situation. Moving to a care home is typically a stressful and emotional time, often made worse by financial worries over how you’re going to afford the fees. You must speak to a legal specialist if you are considering the possibility to put house in Trust to make sure that it is set up correctly. This kind of Trust lets you to ring-fence a percentage of your property for your loved ones to inherit after your death.
So, while in reality Mark now only has £20,300 in savings, the local authority treat him as though he still has £29,300. This will mean that rather than being left with a minimum of £14,250 after paying for care, the local authority only leave mark with £5,250. People sometimes think about giving away some of their savings, income or property to reduce the amount they’ll need to pay towards their care.
UK Care Guide - A trusted resource, as seen on
If you own more than the upper limit currently £23,250, you will be expected to fund the full cost of your care fees. You would not be able to receive any financial help from your local council until your savings have been reduced to the upper limit. In other words, the local authority cannot get its hands on that half for care cost fees. The terms of the trust are dictated by the couple at the outset, so the surviving partner cannot be thrown out by impatient children, for example. If a person is found to have 'deliberately deprived' themselves of assets, the value of these assets can still be taken into account in the financial assessment, even though they no longer own them. Some states, such as Colorado, do not count periodic payouts from annuities when determining Medicaid eligibility.
The local authority will consider it "deliberate deprivation" and you will not meet the test for assistance with care fees. If your savings and assets are below the means threshold, the local authority will pay for care for you. The care you receive will be based on the outcome of your needs assessment. It can be a shock to many people when they find out they may have topay over £100,000 for their carehome costs.
Getting the right advice
One thing you may hear some recommend is what is formally known as ‘disposal of assets’. This is different from putting your house into a trust to avoid care home fees. However, simply signing your house over to avoid care costs isn’t possible if it is done a few months before you go in to care. This would, in all likelihood, be seen as a deprivation of your assets. Likewise you cant just use the money to decorate your house and spend it all that way..
That seems like plenty to retire on … until the husband is diagnosed with dementia. Suddenly, they have to worry about the cost of long-term care, which could be $8,000 a month or more if he needs to move into a nursing home. When someone enters care they are automatically “means tested” and ALL of your assets, including your home, are taken into account.
Unfortunately, if you are trying to protect assets from nursing home costs, there are several reasons why gifting assets to your loved ones to avoid paying them to the nursing home is a bad idea. Entering a deferred payment scheme can limit the size of the inheritance you leave. If you want to leave your house or other assets to family members, a deferred payment scheme may not be the best option for you to help pay for your care fees. The local authority will evaluate your savings and assets to determine whether you're eligible for a deferred payment scheme.
This info does not constitute financial advice, always do your own research on top to ensure it's right for your specific circumstances and remember we focus on rates not service. If the prospect of needing a nursing home is in the distant future, you may be able to get around the look-back period by making your gifts outside of that five-year window. An illness or injury could cause you to need care sooner than you expect, for one thing. By drafting a living trust, designating beneficiaries, and holding property jointly, you may be able to avoid probate.
Under joint tenancy, when you die the legal ownership of the property will automatically pass to to the other joint owner. The good news is that it is possible to protect some of your estate by using certain trust structures in your will. Those kinds of costs can strike a mighty blow to even the strongest budget. As you can see, there are many considerations you should be aware of when planning for the future and we would always encourage taking advice from a solicitor beforehand. Our lawyers provide legal expertise to clients near and far from our offices located across the UK and in Brussels. These are also products which can give a family a huge amount of control over what goes on during the care process, and how it is to be paid for.
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