Unfortunately, many families lose their family home in order to pay for care for a loved one later in life. Research has shown that most older people will require some form of long-term care and, in some cases, care home fees can be extremely expensive.
To some families, care home fees are pretty much unaffordable, and therefore their only option would be to sell their family home in order to use the capital from the sale to be able to pay the hefty fees.
What Happens to the Home Owner That Enters a Care Home?
The local authority will not count a home as capital until the home owner has been receiving residential care for at least three months or if the stay in the home is just temporary.
However, if the circumstances change and the stay becomes permanent, the home will be classed as the owner’s capital 12-weeks from when the decision to make the stay permanent happens.
If any of the following people are still residents of that house, then the home in question still will not be classed as capital:
- Husband, wife, partner or civil partner
- A relative over the age of 60
- A relative under the age of 16 who the home owner is responsible for
- An ex-husband, ex-wife or ex-civil partner, if they’re a lone parent
Could the Home Owner Gift the House to Another Member of the Family?
Some home owners may consider gifting their home to a close relative in order to protect it from care home fees. However, there are some disadvantages to doing this.
The first reason as to why it may not be worth it is because the member of the family that is receiving the house will be required to pay tax or income that they receive from this asset.
Also, the family member that received the house may potentially die, get divorced or get into serious debt, in which case the family home could potentially become involved in legal proceedings.
There may also be implications if you have no other reason for gifting your property other than to deprive yourself of assets that would be available to pay care home fees, especially if it is vital. Solicitors, however, are often able to uncover other substantive reasons for not gifting property and the reasons that get identified are usually recorded and not overshadowed by the fear of paying care home fees.
If it can be proved that the only reason for the transfer of the house was to avoid losing it to care home fees, then you’ll be treated in the same way as you would if you still owned the property, and the cost of care would have to be paid.
If the transfer happened less than 6 months prior to moving into a care home, then the Local Authority can automatically recover the property without having to prove reason.
Can a Family Trust be Used to Ring Fence the Home Against Fees?
Another option would be for the home owner to transfer the home to a family trust. This is where the owner will transfer the property, and any other significant assets, to a trust which can then be set up with the aid of a trust solicitor to benefit loved ones.
This can’t be done without an experienced trust solicitor who has expertise in estate planning for older clients. They will ensure that the family trust is suitable for both the home owner, and everyone involved. They can ensure that the documentation is drafted properly, protects you and that you have appointed the right people to act as your trustees.