PROTECTION OF THE FAMILY HOME

Many people are keen to protect their family home to ensure it can be passed to children or other
relatives as an inheritance.

Another major concern is making life simple for the family at difficult times; death and loss of capacity.

Not only are there worries about weekly care home fees (in the North Eastland exceeding £600 per week) but what happens to assets if there is divorce, bankruptcy or a member of the family is dependent on means tested benefits. The value of a property or a share in property is usually taken into account to fund the cost of care, determine eligibility for means tested benefits, in a divorce settlement or to satisfy creditors.

Some home owners are anxious to protect their property for part of the family without creating difficulties for others in the family. A typical example is a second marriage with the home owned by the parent with children from an earlier relationship wanting to ensure the property is always available as a home for wife/husband.

SIMPLIFICATION FOR THE FAMILY

If a property is in a trust on death there is no need for a Grant of Probate or Letters of Administration to deal with the title of the property; for example, sale. Often incurring the cost of a Lasting Power of Attorney Property and Financial Affairs can be avoided and there would never be the need to apply to the Court of Protection for the appointment of a Deputy to deal with the house.

ADVANCE PLANNING TO PROTECT THE HOME

If plans are made at an appropriate time, it is possible under current legislation to safeguard the family home for future generations. It is important to act in plenty of time!

The Local Authority is given guidance notes that must be adhered to when carrying out financial assessments. The guidance notes currently in place are called Care and Support (Charging and Assessment of Resources) Regulations 2014 (‘the Charging Regulations’). The guidelines confirm that

“it is unreasonable to decide that a resident has disposed of an asset in order to reduce his/her charge for accommodation when the disposal took place at a time when he/she was fit and healthy and could not have foreseen the need for a move to residential accommodation”.

In light of the above local authorities scrutinise transfers of properties made within a year or two before care is needed and other cases when they suspect that the transfer has been effected to avoid nursing home charges due to medical history. The local authority is more likely to scrutinise a transfer if it has been made at a time when the person transferring a property or other assets is in poor health.

FAMILY TRUSTS

Rather than make an outright transfer of property, the family home is more safely protected by transferring it in to a trust.

Trustees are appointed by you to be the legal owners of the property. The trust is drafted in such a way to ensure that you reserve a right to occupy the property (or a replacement property) for as long as you wish. The type of trust used is a discretionary trust. The reason for using a discretionary trust is that it means if any of the beneficiaries of the trust get divorced, get into financial difficulties or die, the property would still be protected.

You name the beneficiaries of the family trust. In most cases the beneficiaries are children. There is normally a letter of wishes to accompany the trust deed stating that when the property is sold the sale proceeds are to be divided as per your stipulated wishes. In setting up these trusts it is important that it is appreciated that the trustees have an important task as they are the people who would carry out your wishes.

PROTECTION

If the trust is set up in advance and for reasons other than avoiding the cost of care the capital in the trust is likely to be disregarded in the event of the need for residential care.

RISK

As an increasing number of people take allowable steps to protect property from care fees, the local authority may become more aggressive in trying to set aside transfers into trusts.

COSTS

TMJ Legal Services currently charges £1,300 including VAT plus associated Land Registry fees to set up a family trust. If you would like to talk about this type of arrangement, Clair or one of her team is happy to have a discussion at no cost. You can make a no obligation appointment at one of TMJ Legal Services’ offices and often a member of the team can also assist with out of office meetings.

— July 2017