Home Protection Scheme Trust

Parents who, throughout their hard working lives, have built up nest eggs intended for their children to inherit have seen this potential inheritance decimated over what can be a relatively short period once in care.

With proper planning, this potential situation may not have to happen. There are ways to help protect the family home for the next generation.

RECEIVING FUNDING

Not everyone is eligible for local authority funding but many people will be able to get some kind of financial support. It all depends on the amount of capital (savings and assets) your relative has, as well as their income.

If your relative lives in England or Northern Ireland and has capital less that £14,250 (2014-2015), they will be entitled to maximum support. Anyone receiving full funding will have to contribute all of their income (including benefits, which they must claim) to the local authority, except for the Personal Expenses Allowance.

If your relative has between £14,250 and £23,250 in capital, they have to contribute towards their fees. They will have to pay £1 for every £250 of their savings between £14,250 and £23,250. This is know as ‘tariff income’ and they will also need to contribute all of their income towards the fees except for the Personal Expenses Allowance.

If your relative has capital of more than £23,250 they will need to use that capital to pay the full cost of their care. If your relative has less than £23,250 in capital, but a weekly income high enough to cover their care home fees, they will be liable for all of their care home fees.

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WHAT’S IN THE FINANCIAL ASSESSMENT 

Below is a list of what is included in the Financial Assessment for Residential Care

• The value of any property that your relative owns, unless their partner or certain others are still living there.
• All income from property rental, investments, pensions and benefits that are in your relative’s name.

• Bank and building society accounts.

• National Savings and Premium Bonds.

• Stocks and shares.

• Shares in a family business.

• Regular savings and investments, including ISAs.

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WHAT’S NOT IN THE FINANCIAL ASSESSMENT

Below is a list of what is not included in the Financial Assessment for Residential Care

• The value of any property that your relative owns, if their partner or certain others are still living there.

• Personal possessions (as long as they were not purchased to avoid residential care charges).

• Surrender value of life insurance policies/annuities.

• Investment bonds with a life insurance element.

• The mobility component of Disability Living Allowance, or Personal Independence Payment equivalent.

• The War Pension scheme mobility supplement.

• War Widows special allowance (also referred to as War Widows special payments).

• Some charitable payments.

• Pension savings.

• Christmas bonus.

• Certain trust funds, such as compensation for personal injuries.

• In Wales, earnings from employment, including self-employment.

Your relative should seek advice from an independent financial adviser (IFA) if they have complex financial arrangements such as money in trust, certain bonds or compensation payments, or shares in a family business.

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RULES FOR COUPLES

A person being assessed for residential care should be treated as an individual. If they are married or living with a partner, the partner’s finances (including the value of their homes ) should not be included in the financial assessment and there is no expectation that the partner should contribute to the cost of the their residential care.

If your relative has a private or occupational pension, which is helping to support a married or civil partner who does not live in the same care home, then 50% of their pension will be disregarded when calculating income.

If your relative shares earnings from rental income, assets or savings with another person ( a married partner, family member or friend), it might be a good idea to split any joint accounts into separate accounts so it is easier to see who has what for the purposes of the financial assessment and paying for care in general. Be warned that there are rules about ‘giving away’ assets.

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PERSONAL EXPENSES ALLOWANCES

When calculating income, your relative is allowed to keep a Personal Expenses Allowance (PEA) to cover personal items such as toiletries, stationery and birthday cards and presents. This is £24.55 each week in England, Northern Ireland and Scotland (2014-2015) and £24.50 in Wales (2014-2015 figure to be confirmed)

This amount will NOT be calculated as part of your relative’s income during the financial assessment. For example, if your relative (living in England) had an income of £100 per week, only £74.45 would be taken into account by the local authority when calculating how much your relative should contribute towards their care.

Local authorities have a discretionary power to vary the Personal Expenses Allowance (PEA) above this level in special circumstances (Northern Ireland excepted). If a person has property-related expenses or is still supporting a spouse, for example.

If your relative owns their own the most important difference between the financial assessment for residential care, and the financial assessment for care at the home and other benefits, is that the values of your relative’s home will be taken into account when assessing their capital (Northern Ireland excepted).

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12 WEEK PROPERTY DISREGARD

If your relative permanently moves into a local authority funded care home in England or Northern Ireland, has less than £23,250 in savings (2014-2015), low income and owns their own property, the council must ignore the value of the property for the first 12 weeks of their stay.

If they have more than £23,250 in savings (in Wales: 23,750), when their savings run down to less than £23,250, the council must ignore the value of the property for 12 weeks.

Whatever the situation, if your relative sells their property before 12 weeks, the disregard ends. After 12 weeks, the value of their property will be counted as part of their capital.

If your relative owns a property with a partner who still lives there, the property is disregarded until circumstances change. If the partner wants to move to a different property or also decides to move to a care home, your relative can use their share of the sale proceeds to help their partner buy another property or cost of care.

If the partner dies, and the house is sold, your relative’s share of the property would then be taken into account as part of their assets. It is worth checking the local council’s procedures regarding this.

Did you know that when you die your executors will have to go through the Probate procedure in order for your house to be sold or transferred to the beneficiaries? This can be a time consuming and expensive burden to the family whilst grant of probate is applied for and accepted.

A typical property worth £160,000 can cost in the region of £3,000 in probate fees. With proper planning this situation can be avoided; thereby protecting the family home from these procedures and fees*.

• in many cases The Home Protection plan will eliminate completely the need for probate as the home will not form part of the probate administration. However other aspects of your estate may still necessitate the need for probate on part of your estate.

Did you know that if you did not have a Lasting Power of Attorney and lost your mental capacity, you or your family would not be able to deal with the administration of your property? For example selling your property? With proper planning this situation can be avoided.

There are ways to allow your chosen family members to deal with the administrative burden of your property.

Did you know that waiting for your will to hopefully transfer your home to the right beneficiaries can typically take anything up to 3 months through the probate procedure?

This situation can be avoided with the intended beneficiaries receiving their inheritance immediately on death and not subject to the expensive time consuming probate procedure.

Did you know that parents are sometimes concerned that their home may be inherited by their children at a time when it could become part of the proceeds in regard to a divorce settlement?

With proper planning this situation can be avoided where the home cannot be sold to fund or form any potential divorce settlement.

Did you know that assets in trust cannot be contested?

It’s designed for homeowners

•For single people or couples

•If both individuals in a marriage are still alive when HPS is entered into then this makes the position even stronger as the home would be disregarded if one of the couple went into care

•Usually those from the mid 60s upwards

•Those in reasonable health

•Those for whom entry into care is not being contemplated but only a distant possibility

•Those whose property does not exceed the nil-rate bands; currently £325,000 for single people and £650,000 for married couples

This basically involves the transfer of a client’s home into a trust

•The person creating the trust may continue to live in the property for the rest of their life and they themselves can be a trustee

•Despite the trust now owning the property, the client still retains all benefits and flexibility appertaining to home ownership and can sell the property at any time or move to a smaller property with the trust still in place

•The home should no longer count as a capital resource

•On death of the former owner the property passes to the chosen beneficiaries

•The Trustees ensure your home will pass to those people you wish to benefit at a time selected by you

•A surviving spouse may remarry and predecease the new spouse but it stops the new spouse leaving all their new assets to their children and excluding the children from the first marriage

•You are not at the mercy of unscrupulous 3rd parties or even manipulative children who can assert pressure on you to obtain money

•Stops the situation where children could become part of a disastrous marriage where their partner could have a claim on their inheritance

•Should children become bankrupt then they cannot claim against assets of the trust

•If there is the possibility of you going into care then again by setting up the Home Protection Scheme for the right reasons this would have a major impact on why a local authority would find it very difficult to seize the property to pay for the care home fees.

The cost of setting up this Trust is relatively small compared with the potential savings the trust can achieved

• Individual circumstances vary a great deal and a thorough review of the clients’ affairs must be carried out to ascertain the need for the Home Protection Scheme.

•Clients’ plans should be discussed with their immediate family of whom this will have the greatest impact; i.e. the beneficiaries of the estate

•If, having moved into care, it is found that you have deliberately deprived yourself of resources (including your home) you can be considered as still having those resources and the local authority will calculate your entitlement accordingly. This would include the establishment of the Home Protection Scheme. The timing of the disposal of the asset has to be taken into account. While there are no hard and fast rules, the longer the period between the transfer of the property to the trust and the need for care, the lower the likelihood that ‘deliberate deprivation’ can be proved.

You can simply give away your home to members of your family without the use of a Trust. However, we strongly recommend that you don’t do this for the following reasons:

•Lose Control; once you give your home away it is no longer yours and you lose all control over it

•Divorce; if your children were to divorce the home could be under threat as part of a divorce settlement

•Bankruptcy; if a child went bankrupt the home would be under threat

•The new owners of your property could pressure you into entering residential care sooner than you would have wanted to

•Finance; the children could raise finance on the property. It is now the children’s house to sell!

•Obtain some local authority grants for repairs and maintenance so it’s best to take advantage of these schemes before setting up the HPS

•Obtain equity release schemes. So it’s best to take advantage of these schemes before setting up the HPS

•Remortgage or take any further secured lending on the property. So it’s best to take advantage of this funding before setting up the HPS