Ison Harrison Legal Services - Family Trusts
Millions of elderly and some not so elderly people who own their own homes have a natural fear of what will happen if they go into a nursing home. In many cases the house that they have worked long and hard to pay for may have to go to pay nursing home fees rather than to their children. With the standard cost of a nursing home being between £500
and £1000 per week it is easy to see how the proceeds of sale of a typical family home will evaporate very quickly.
There are however some options available to you.
Option 1 – Do Nothing
An option of risk in terms of you may or may not have to go into care and you may or may not have to sell you home to fund privately.
Option 2 – Change the way you own your home and your wills
Most couples own their homes as what are called joint tenants. This means that when one of them dies the property passes automatically to the survivor. It is typically the survivor who will go into a home and this is when nursing home fees will start to bite.
You can change the way you own your home and become what are called tenants in common. This means that you can leave your half shares in the house in accordance with the terms of your wills. The first to die would leave the survivor what is called a life interest trust in the first to dies share of the property. This means that the survivor would be
able to live rent free in the property for the rest of their life but if they go into a home they would only be assessed as owning half the property (the half that was always theirs) and the half of the first to die would be protected.
The advantages of this option are that it is slightly cheaper and there are no time concerns. It gives the couple maximum flexibility to change thing whilst they are both alive.
The disadvantages are that it only protects half of the house and none of the house if both of you go into a home. What could be said to be an advantage or a disadvantage is that once the first person dies the survivor cannot change where the first persons half of the house goes to.
The survivor can however move to another property.
OPTION 3 – The full life interest trust
You can transfer the house to a trust during your lifetimes. The trust says that you can live in the property rent free for the rest of your lives and that when you die it goes to your chosen beneficiaries. Subject to you not going into a home for around two to three years after doing this then it is unlikely that the local authority will seek to challenge the gift into trust
(but one can never say never). This is the most comprehensive option.
Once the house is in trust you are able to live there rent free for the rest of your lives. If you go into a home then you would be entitled to the income that the proceeds of sale generates but not the capital. This is why the capital will generally be safe from nursing home fees as it is not yours.
The advantages to this option are that, subject to it not being challenged, it will protect the entire capital value of the property.
The disadvantages are that once the house is in trust it can be hard to break the trust and change where the house or proceeds of sale will go when you die or in other words you can’t fall out with your children! Also if you sell the property, although you could purchase a new property, if you move into rented accommodation or sheltered housing you will only
be entitled to the income and not the capital.
This option costs more than the previous option but generally only around the same amount as one week in a nursing home.
“Protecting you from Nursing Home fees for less than the cost of one week in most nursing homes”