Common Legal Questions: Care Home Fees
Posted on 14th November 2019
When you own a property as joint tenants with your spouse or partner (or, indeed, another individual), it will automatically pass to the survivor of you on the first death. For a lot of couples, this is what they want, as they would wish for their loved one to have their share of the house if they passed away.
However, in some cases, it’s important to consider whether you would want to protect your own share of your property from being used for your loved one’s care home fees.
One way of ensuring that your share of the property is protected from being taken by care fees that aren’t your own, is to sever the joint tenancy on your property, so that you own it as tenants in common. When a property is owned as tenants in common, rather than automatically passing to the survivor of the owners, your share of the property would pass as per your Will (which is another VERY important reason to have a Will!).
Severing the joint tenancy is usually achieved by preparing a mutual notice of severance, which is signed by both owners in agreement, or a notice of severance which is served by one joint owner upon the other (in accordance with the Land Registry practice directions). Once this has been done, one - or both - owners can apply to the Land Registry to enter a Form A restriction against the property, which would show anyone who deals with your property in the future, that the property is not to be sold by one sole owner, without permission of the other, or a Court order.
Now, this doesn’t mean that your spouse or partner will be kicked out when you die, as they still legally own half the property. However, you can grant your spouse a ‘licence to occupy’ the property for their life, for the avoidance of doubt, and there are a few different ways that this can take effect.
One common way, is to allow your spouse to live in the property for their lifetime. They can also use the sale proceeds to purchase another property, and they, as the occupant, will be expected to pay any outgoings or rent or mortgage on the property. When they die, or if they are taken into care and the property is sold for good, the Will clause comes to an end, and your beneficiaries, who are often children or relatives, will be entitled to your half of the sale proceeds.
This means that, if your joint owner is taken into care, only the value of half of the property is taken into account by local authorities for the assessment of fees, and therefore your beneficiaries don’t lose out on their share of the estate.
Another way of dealing with this which is more complicated, is known as an ‘Immediate post-death interest’ trust (IPDI). This is similar to the above Will clause, however even if the spouse or joint owner is taken into care, they would continue to have an interest in the property until they die. This means that they could benefit from the property and the income from the same, until they pass away.
One drawback of an IPDI trust is that, on the first death, the deceased’s share of the property will be used as part of their inheritance tax calculation. Similarly, on the second death, as the person had a full interest in the property and the income, their estate will need to account for this in the inheritance tax calculations, which can lead to tax being payable on assets that they may not have actually owned.
Our Wills solicitors in Preston and indeed, our Lancaster solicitors, would explain that it’s not always as black and white as the above may appear, unfortunately, and you should ALWAYS take the advice of a solicitors before deciding to go ahead with IPDI Wills.
In some cases, our Wills clients may decide that the smaller interest in the property suits them and their circumstances more, however, others may find that a full interest is preferable for their situation.
As full IPDI Wills are more complex, our wills solicitors’ fees would be higher, however, if it helps to protect your respective share of your property from being taken in care home fees after you’ve passed away, a lot of our clients agree that it’s worth it. Our Wills solicitors in Preston can be contacted at email@example.com, or by popping into your local office.
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