Can I use a trust to avoid care home fees?
The cost of residential care for elderly homeowners is an increasing worry. Trusts made with a Will can offer some safeguards, but careful and advance planning is needed, as Roz Wyeth explains.
The rising demand for and the cost of long term residential care of the elderly has driven waves of government reforms, resulting in those homeowners with assets of £23,250 having to fund their care themselves.
It has caused concern and anguish for many of our elderly clients and their families, who face having to sell their family home or see savings wiped out to cover those costs. It has also given rise to a variety of financial planning measures to mitigate those fees.
Caution needs to be taken, however, when buying into financial products that offer the promise of avoiding the cost of care home fees. If the decision to shelter assets is made in a way that can be interpreted as a deliberate attempt to avoid care home fees, local authorities can challenge that decision. A local authority might, for example, successfully argue that a trust created a few months before an elderly family member is due to move into a home is deliberate avoidance, known as deprivation of assets.
At Coffin Mew, we would recommend that those with assets over the £23,250 threshold, which includes the family home, consider creating a trust that sits within your Will. This trust will hold those assets for the benefit of your spouse, your children and any others who you may wish to benefit.
It is important that such a trust is created long before the family member goes into care. A good time to consider this is when still hale and hearty and when updating a Will.
Such a trust will ensure that assets are passed into a life interest trust on the death of the first spouse, for the benefit of the survivor. As the trust fund is held by trustees it does not form part of the surviving spouse’s assets and therefore cannot be included in any financial assessment.
There is a myth that trusts are the preserve of the very wealthy, expensive to create and complicated to manage. A simple trust, with relatively modest assets, that is wrapped up in a Will need not be expensive to create, and is usually terminated as part of the probate process. It is a cost effective and simple way to ensure that your assets are left to those you choose, and not to a local authority care provider.