How Can I Plan My Estate to Address Potential Care Fees?

INTRODUCTION

What are care fees?

Long-term senior care facilities charge care fees for the provision of elderly care, and if you have a lot of assets, these costs can add up over time.

An often overlooked aspect

Many people often overlook this vital aspect of estate planning, particularly in the context of long-term senior care. These care costs can add up over time, especially for people with many assets.

Avoiding these care fees will be at the top of your mind for anybody thinking about drawing up a Will and planning for these costs is integral to not just Will writing but also estate administration.

There are several ways to lessen the cost of care fees in England.

This article is designed to assist you in understanding and implementing a range of strategies which can help safeguard your assets from hefty care fees and guarantee that your wishes are honoured after you pass away. 

UNDERSTAND THE MEANS TEST

The Means Test is used by the government to assess a person's ability to pay for care. So, the first step in avoiding care fees is understanding how the Means Test works.

If an individual holds assets worth more than £23,250, they will be expected to pay the full cost of their care.

However, some assets are disregarded in the Means Test, such as the individual's home if it is occupied by a spouse, partner, or dependent.

PROTECT YOUR HOME

It is vital to protect your home so that the government does not take it into account when assessing your ability to pay.

You can do this by drafting a Will stating that the home should be passed on to your spouse, partner, or dependent after your death.

USE TRUSTS

Trusts are powerful tools that can help you protect your assets and avoid care fees. You should consider them as legal arrangements whereby you transfer ownership of your assets to a Trustee.

The Trustee then holds the assets for the benefit of the Beneficiaries.

Trusts can be set up in such a way that they protect the assets from being taken into account in the Means Test, thus allowing you to avoid care fees.

Under English law, there are several types of Trusts that you can consider to help protect your assets and avoid care fees:

• Life Interest Trust: This type of Trust allows you to transfer ownership of your assets to a Trustee, who then holds the assets for the benefit of your spouse, partner, or dependent. The Trust is set up so that the assets are not considered in the Means Test, which assesses your ability to pay for care.

• Discretionary Trusts: This type of Trust allows the Trustee to make decisions about how the assets in the Trust are used, and the Beneficiaries have no legal right to the assets. Discretionary Trusts can be used to protect assets from being taken into account in the Means Test, as the Trustee holds the assets and is not directly owned by the Beneficiaries.

• Property Protection Trusts: This type of Trust is specifically designed to protect the person's home from being taken into account in the Means Test. The Trust is set up so that the person's home is transferred to the Trustee, who then holds the property for the benefit of the person's spouse, partner, or dependent.

• Inheritance Tax Planning Trusts: These Trusts are set up with the primary purpose of reducing the amount of Inheritance Tax that will be due on the death of the person setting up the Trust. Depending on the type of Trust and the terms of the Trust, it may also be possible to protect the assets from being taken into account in the Means Test.

It's important to remember that each type of Trust has its own rules and requirements, and the most appropriate Trust for your specific needs will depend on your individual circumstances and goals.

If you wish to understand the choices available to you, contact us, and we'd be happy to discuss the options that meet your specific needs and goals.

CONSIDER DRAWING UP A POWER OF ATTORNEY

A Power of Attorney is a legal document that allows you to appoint someone to act on your behalf if you are unable to make decisions for yourself.

This can be especially useful in situations where you become incapacitated and need someone to manage your finances and assets. By making a Power of Attorney, you can ensure that your assets are managed in a way that protects them from being considered in the Means Test.

CAUTION: PLAN EARLY

Early planning early is crucial in avoiding care fees. The earlier you start planning, the more options you will have available, and the easier it will be to protect your assets.

If you wait until you are already in a care home, it may be too late to protect your assets, as the government will have already assessed your ability to pay for care!

Need to know more or you’d like to discuss your options?

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