Hello and thank you for your question. I will be very pleased to assist you. I'm a practicing lawyer in England with over 10 years experience.
May I clarify that you are seeking to secure your property against the possibility of claims for care fees please?
Who has suggested £3500 as a fee?
You are correct that our major concern is care home fees. We have been speaking to a neighbour who has taken this route and we felt that this was expensive as the requirement seems straight forward.
I do apologise for the delay in replying to you. One of my colleagues mistakingly locked the question preventing me from posting. May I continue to assist?
May I ask finally whether your estate is likely to be taxable for inheritance tax? You each have an exemption of £325K as things stand before tax is due.
Total will not exceed £500,000 so inheritance tax is not a problem.
Thanks. Out of interest did your neighbour use a qualified solicitor or a "trust peddling" company to your knowledge?
I believe it was a qualified solicitor but it is a little difficult to investigate further.
Thank you. There are a number of ways in which you can consider protecting your property in the event that either of you had to enter into care in the future in these circumstances and you need not spend anywhere near the amount your neighbour has quoted to do so. The first thing to say is that if one of you had to enter into care whilst the other was alive, because of the rules the council must abide by, the property cannot be considered for means testing whilst the survivor still lives in it. This is because the council are not allowed to include the property to means testing if your partner/spouse is living and vice versa
One of the simplest ways you can consider is by preparing mirror Wills which incorporate something called a life interest trust in them. A life interest trust works on the basis that each of you own a half share in the property as will be the case if you switch to tenants in common ownership (essential for the wills to work), but rather than simply leaving that half share to each other absolutely, you leave it to each other in something known as a life interest trust. A life interest trust gives the survivor of you a right to enjoy and live in the property for life but does not make a gift of ownership of the capital in the property. the advantage of this is that if the survivor of you subsequently has to enter into care then the council would not be able to touch the property that was contained within the life interest trust. In addition, because of the rules the council have to follow, the other half share cannot be valued at market value but at a fraction of market value because the council must consider that the other half the property is owned by a trust.
Drawing up new mirror Wills which incorporate a life interest trust can be done very simply through a solicitor, usually for somewhere between £350 and £600 depending on how keen the solicitor is for business.
There is a risk to the above approach though. It is cheap and effective but there is a risk that if both of you had to enter into care (i.e. you both are alive but in care) the house would become available to the council for mean testing. If this is a concern, and of course the above can happen then it is possible to look at creating a trust now rather than in your wills.
Under this approach you actually transfer the property into a life interest trust now during your life. In the same way as above you under the trust you will have the right to enjoy the property and can still downsize and move as you wish providing the trust is prepared including such a provision, but you will be depriving yourself of access to the capital you place in the trust to just spend. You may for example wish to downsize and use some of the capital you have leftover or you may wish to obtain a equity release mortgage. You could not do these things if you transfer the whole property into a life interest trust. In doing so however, the entire property would be insulated from any council claim providing the council cannot prove that you transfered the property into a life interest trust in order to avoid care fees. This is very difficult for the council to prove unless you use a company which advertises such trusts as a means to avoid care fees. Such schemes typically do not work because the advertising material is all the evidence the council needs to overturn it. If considering this approach, to ensure that you use a solicitor rather than an unqualified company.
As above, you may decide to place your entire property into trust but equally, you may decide just to place a percentage of the value of your property into trust. Placing just a percentage of the property into trust rather than the whole of it can have its advantages because firstly you are not tying up all your property into a trust - remember you can use the property but cannot spend the capital in the trust which is a restriction - but also because if the council seek to make a claim against the property in the future, they have to value the part of the property not in trust at a fraction of its market value because of the rules it is bound by called "CRAG rules" which requires the council to value the property on the basis that part of it is owned by the trust meaning that few would want to buy the part share that is not. This approach can give you to some extent the best of both worlds and the percentage you decide to place into trust can be discussed in more detail with a solicitor or professional financial adviser.
On the other side of the coin do remember that in the event either of you did have to enter into care you need to consider that you may want some choice as to care home and may want to top up fees offered by the council to live in a home of your choice above the standard provided by the local authority. Transferring your whole property into a trust potentially disadvantages you unduly in this respect as you may not have access to the capital you transfer to pay such top up fees with. There can often be a balance to be decided between leaving something for your children and ensuring you have a satisfactory quality of life and cattle fall must be given to this.
To set up a life interest trust now, I would estimate a solicitor would charge somewhere between £750-2000. I have prepared thee in the past for £1000-1250. £3500 is top end price for a life interest trust.
Does the above answer all your questions or is there anything I can clarify or help you with any further?
Whilst we are still unsure as to how to proceed we thank you for your help.
A pleasure. If I can assist any further as the situation develops please do not hesitate to revert to me.
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