Bill Neville discusses with Stray FM, Could you lose your house or inheritance to care home fees?
Transcript:
Presenter:
This evening on the family show, I have Bill from Newtons Solicitors with me. Good evening, Bill.
Bill Neville:
Good evening.
Presenter:
We’re here to discuss care home costs, particularly those connected to wills, and how they all link.
Bill Neville:
So, I would say when people are thinking about their wills, they’re thinking about their loved ones, perhaps their children, the people they would want to receive wealth when they die. Obviously, everyone wants to leave their loved ones as much as possible, and I think one worry, probably specifically for more elderly people, is the cost of care. So, if it was necessary to go into full-time residential care, the cost would be very expensive. I need to go through the numbers there, but it is very expensive. A concern that a lot of clients have is, ‘well, if I go into care and I live, I pay the cost of care for perhaps ten years, twenty years, and there may not be anything left to leave my children.’
I think it is important to think about what you can do now so that you can leave as much wealth as possible to your loved ones. So, when an individual goes into care, the local authority will carry out a financial assessment. They will factor in assets, cash held in the bank account, and property.
Importantly, I will say under the current rules for property, if a spouse is living there, the property is disregarded from the financial assessment. So, if you have a husband and wife living in the home together and the husband goes into care, the local authority will not include the property in their financial assessment. The difficulty is, well, what happens if the husband dies, leaves everything to his wife, and then the wife subsequently goes into care? Your issue is that the local authority will include the full value of the property in their financial assessment.
Obviously, if the wife were to live in full residential care for the next twenty years, it’s likely that there would be very little equity left in the property. The local authority may go as far as putting a charge against the property, which acts in the same way as a mortgage, meaning that when the property is eventually sold, the first amount that is paid from the process of sale is the cost of care. The risk is you have very little equity left for the children of the beneficiaries named in the will.
So, just on that point, I touched on the financial assessment authorities carry out. If an individual’s estate is in excess of £23,250, then they are expected to make full contributions towards the cost of care. Once the estate gets down to £14,250, you are not expected to meet the cost of care, so you are effectively left with a capital of £14,250. I think it’s a valid concern of clients that think, ‘Well, whilst £14,250 is a substantial sum of money, when you compare that to the value of a property, it’s very little.’
Bill Neville:
Before going on to talk about what you can actually include in the will think it’s important to make a distinction between how property can be earned.
You can own a property as a joint tenant, in which case the property would pass automatically to the surviving owner. You can also own a property as tenants in common. Now, tenants in common means husband and wife or two parties owning property jointly, the property passing automatically on the first death; each owner of the property has their own distinct share, so it can be 50/50, 50% each, can be 70/30, 70% and 30%.
The important point to make is each owner is free to dispose of their share as they wish. So, if in their will, they are free to leave their share to someone else, I would say that leads us quite nicely on to thinking about ‘well, what can you do with the wills?’ In relation to the cost of care, what you don’t want to happen is for the husband’s share of the property, if he dies first, to pass to his wife. The reason is that if the wife subsequently requires care, then the property is hers; the full property is hers, and the local authority will include the full value of the property in any financial assessment. Again, ultimately, that may mean when the wife dies, there is very little equity in the property actually left to her beneficiaries in her will.
At the same time, if the husband does die first, what you don’t want to happen is for him to say, ‘Well, I don’t want my share to pass to my wife because I don’t want it to be used for meeting the cost of care.’ So, you don’t want a husband to say because of that, ‘my share goes straight to my children.’, for example. The reason is that if any of the children are bankrupt, divorced, or die, they have an interest in the property. So, effectively, what you’ve done is you’ve taken away the wife’s security in the home.
Presenter:
So, for anybody who is listening now, Bill, who is thinking they need to make changes to their will or want to discuss further with you guys about what you’ve just said on the radio, what’s the best way of getting in touch?
Bill Neville:
So, I think the best thing to do is just pick up the phone and give us a call. From there, we can let you know whether we feel it’s appropriate to make an appointment. It’s often easier to give instructions in person.
If you ask to speak to a person in our private clients department and it’s in relation to the wills, we would be happy to assist anyone who calls in.