Mary Holmes, 68, recently diagnosed with early onset Alzheimer’s disease, is a retired pensioner who lives with her husband Matthew, 71 in their family home in Barnet. Matthew has been diagnosed with an advanced terminal lung cancer, and the family are concerned about Mary's well-being in the future. The nature of Mary’s degenerative condition has meant that her three sons may sometime in the future, may have to make the decision to move her into a care home where she will be given the twenty-four-hour care she will require for her safety and wellbeing. Patrick Holmes, Mary’s eldest son has been made Power of Attorney for Mary, to ensure her needs and wishes are looked after, should she lose the capacity to make decisions for herself.
Mary and Matthew are aware that individuals with capital and savings above £23,250, will be required to fund all their own social care expenses. As their home has a current market value of £285,000, they will not receive state assistance with care home fees. There is also a Deferred Payment Agreements scheme (DFA) operating in their local council, which means they, like many elderly people in the UK, have to hand over their properties to the local council should they need full time care, who would then hold the homes as collateral to cover the cost of social care. This means that effectively, the homes can be legally seized by the local council once a person dies, to cover debts. Mary and Matthew worked hard and saved for most of their lives for a family home, which they one day hoped would be passed on to the next generation. The government have proposed to raise the threshold to £118,000 in 2020, however, for many, this will still mean their children’s inheritance will be at risk. This is an unfortunate reality, where children are no longer able to inherit a share of the family home because of the cost of care.
Financial Planning for Nursing Home Fees
After a full consultation, we would give Mary and Matthew the following advice:
Mary and Matthew both owned their house in ‘joint ownership'. This is the most common way in which married couples can share ownership of a house. What it means exactly, is that when one partner dies, the whole house automatically becomes the property of the survivor. However, what this will mean in future terms, is that when one partner dies, and the remaining partner has to go into full-time care, the house, which will now be in their 100% ownership, and the entire property will be held as collateral to cover the cost of nursing home care. With the average cost of nursing home care in the UK at £40,000 per year, this will mean most of the value of the property will be swallowed up in fees, until the surviving partner’s assets have been brought into the government threshold for financial support.
As a solution to this problem, we suggest changing the ownership of the property from joint ownership to a ‘tenants in common' arrangement and putting in place a Life Interest Trust for deceased's share in the property for the benefit of the surviving partner. A Life Interest Trust is an arrangement under which someone is given the right to occupy in an asset during their lifetime without ever becoming the owner. Owning property as tenants in common with your partner means you both own the property but own separate shares in the property. Usually, most couples each own a 50% share, but if one person is investing more of their money into the property than the other, the shares can reflect the amount each person has invested. When a tenant in common dies, their share of the property passes into their estate and is dealt with as per the terms of their Will. Owning your property as joint tenants means there is no separate distinction between tenants and you must act together as a single owner. This will mean only the half of the property owned by the survivor will be at risk from care bills, and fifty percent of the value of the family home can be passed on to your loved ones when the second partner dies.
Speak to us if you are concerned about the cost of nursing home care. Our advisers would be more than happy to guide you through your options, and can help you set up a financial plan suited to your specific family circumstances.