Introduction
As we age, we may find ourselves needing support and care in a residential care home. Unfortunately, this type of care can be costly and can quickly consume any assets we have acquired over the years. This is a growing concern for many people, especially those who hope to leave an inheritance for their loved ones. In this article, we will explore six ways to protect your assets from care home fees and ensure your hard-earned money goes towards your legacy rather than care home costs.
Creating a trust
A trust is a legal agreement between a person (the settlor) and a trustee (a person or company responsible for managing the trust’s assets for the beneficiaries). Creating a trust is a popular way to protect assets from care home fees because it allows you to transfer ownership of your assets to someone else (the trustee). This means that the assets are no longer in your name, and therefore, not taken into account when assessing your care home fees.
However, there are some drawbacks to creating a trust. You lose control of the assets you put into the trust, and you may need to pay for professional advice to set it up and manage it over the years. You need to ensure that you trust the individual or company you select as the trustee.
If you are considering a trust, it’s essential to seek legal and financial advice. A knowledgeable solicitor or financial adviser can help you create a trust that meets your specific needs.
Property Protection Trust
A Property Protection Trust is similar to a trust, but it deals explicitly with protecting your home. You transfer ownership of your property to a trust and live in the home rent-free for the rest of your life. When you pass away, the property automatically transfers to the beneficiaries named in the trust.
The advantages of a Property Protection Trust are that it protects your home from being considered as an asset when assessing care home fees and allows your beneficiaries to inherit the property without having to wait for probate to complete. However, not all local authorities recognise Property Protection Trusts and may try to classify them as “deliberate deprivation of assets” to avoid care home fees.
If you choose a Property Protection Trust, ensure it is set up correctly to avoid accusations of improper asset transfer. Again, seek competent legal advice for advice and guidance.
Lifetime Gift
A Lifetime Gift is when you give away your assets while you are still alive. This can be beneficial because it reduces the amount of money and assets you have that can be considered when calculating your care home fees. The sooner you give away your assets, the better, as there are usually rules preventing you from doing so closer to the time when you will need care.
However, Lifetime Gifts can put the recipient in a difficult situation if they need to sell the asset to pay for the care you need. This also means you will lose control of the assets, which is why it is crucial to give some thought before deciding to make a Lifetime Gift.
If you wish to go down this route, it’s essential to seek legal advice to ensure that the gifting process is legal and done appropriately.
Long-term Care Insurance
Long-term care insurance is a type of insurance that pays for care costs in later life. It covers the costs of care home fees, support for activities of daily living (such as bathing, dressing, and eating), and care provided at home. The cost of long-term care insurance policies varies depending on the level of care you want and whether you have any pre-existing conditions.
Long-term care insurance can be advantageous because it can help you to retain control of your assets and allow you to choose the type of care you want. However, policies can be expensive, and you need to be able to afford them for the rest of your life. You need to consider whether the amount of coverage it provides is sufficient, or if you might need to supplement it with extra funds.
If you plan to take out long-term care insurance, shop around for the best deal and look for policy providers with an excellent reputation. Always read the policy details before making a final decision.
Deferred Payment Scheme
A Deferred Payment Scheme allows you to pay for your care home fees over time, with the council covering the cost initially. This means that the council will place a charge on your property which will be paid back when the property is sold or after your death. The scheme is essentially a loan and is arranged through the local council.
The advantage of a Deferred Payment Scheme is that it allows you to keep your home and access the care you need. However, it can be expensive over time and may reduce the amount you are able to leave as an inheritance.
When considering a Deferred Payment Scheme, you need to be aware that not all local authorities offer them. You also need to ensure that you fully understand the terms of the loan and are comfortable with the interest rates and repayment terms.
Seeking Legal Advice
Protecting your assets from care home fees can be complicated, and the laws surrounding asset protection and care home fees are continually changing. That is why seeking legal advice from knowledgeable individuals is essential. A solicitor or financial advisor can help you navigate the complexities of protecting your assets and ensure your plans are legal and effective.
When looking for a professional, look for someone with experience in the area of asset protection and long-term care. They should also be able to explain the options available to you, suggest the best course of action for your individual situation, and be transparent about costs.
Conclusion
As we age, protecting our assets becomes a growing concern. Fortunately, there are several ways to protect our hard-earned money from care home fees. Creating a trust, using a Property Protection Trust, gifting assets while alive, investing in long-term care insurance, using a Deferred Payment Scheme, and seeking legal advice are six effective ways to ensure our assets are preserved. Seek professional advice and make the right decisions to ensure your legacy lives on.
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