Home Protection Plan (Protected Property Trust) - Andrew Wright Practice


Are you concerned about losing your home to care costs?

or

Would you like your share of the home to go to someone other than your partner without them losing their home?

One in every three women and one in every four men are likely to require long term residential care. Funding life in a residential care home or private nursing home does not come cheap. According to the latest survey of 66 councils in England, last year 70,000 homes were sold to pay for residential or nursing care!

Individuals can contract privately to enter the care home of his or her choice when they feel the time is right. The initiative could come from them or from family, Doctors or social workers who recommend that residential care is needed.

In April 1993 the Community Care Act came into force in the UK. It removed responsibility for assessing needs and paying for care from the Department of Social Security to the Local Authorities. Those who enter a home through an arrangement made by the Local Authority might have to pay for it or contribute to the cost whether the authority provides or buys in the accommodation. Just to put this in perspective, for just one year in residential care, the cost could be in the region of approximately £20,000.

The Local Authorities have the right to means test individuals to assess whether any financial assistance will be given. If you have assets valued at over £20,500 and require residential care, you are responsible for the costs and the Local Authority may obtain an order enabling the sale of assets including the home to meet the costs.

The rules are very simple if you require long term residential care and have assets valued between £12,500 and £20,500 you are required to pay a contribution to the costs. If you have assets above £20,500 which includes all those who own their home, then you are required to pay all the costs. Property still occupied by a spouse, partner or other qualifying person is not included in the calculation.

The problem arises after the partner has passed away and the survivor needs to go into care. Under these circumstances, the home is included when the Local Authority calculates the assets and they may accumulate care costs against the property, record a legal charge with the Land Registry or obtain a court order to force the sale of the home. You cannot simply give away property to avoid residential care costs, if your Local Authority can prove that this as a deliberate effort to reduce assets then the gift can be deemed invalid or the recipients required to pay the costs.

A Home Protection Plan (Protected Property Trust) can help protect your property from these costs.

Also a Protected Property Trust can also protect the residential rights of a current partner if the property share is to be left to children from a previous relationship or other beneficiaries.

 

How this works

The property must be jointly owned as "Tenants in Common". Each partner leaves their share of the property (usually 50%) in trust for children or other beneficiaries rather than to the joint owner of the property. This means that the survivor never becomes sole owner of the property which prevents the Local Authority including the whole value of the property when totalling assets if the survivor needs permanent residential care. So the most that could be claimed against is the survivor's half of the property.

Does half a property have a value? In 1993 the High Court ruled that because half a home cannot be sold or rented by itself, there was no value to it and a market valuation today may well follow this ruling. In which case, the value of the asset would be zero and the total value of the property protected.

Why a Protected Property Trust? As well as protecting the home, the Protected Property Trust safeguards the interests of the surviving joint owner, ensuring that the survivor has the right to live in the property without payment of rent for their lifetime. The Protected Property Trust is flexible and will allow the survivor to move home, buy, sell, upgrade and downgrade.

Only after the survivor dies does the first share of the property pass to the children or other beneficiaries. The survivor cannot be forced to sell or move without consenting.

 

Joint Tenants or Tenants in Common

The joint owners of land and property in England & Wales can be registered with the Land Registry in two ways:

  • Joint Tenants
  • Tenants in Common

The majority of homes have been purchased as Joint Tenants, this term means that both parties jointly and severally own the property, and as such, if one tenant were to die, the surviving Joint Tenant(s) automatically become the owner(s) regardless of any Will or other instruction.

This means that upon death a share of property owned as Joint Tenants cannot pass to anyone other than the surviving Joint Tenants as there is no quantifiable way of establishing a defined percentage owned. This may not be in accordance with instructions expressed in a Will and could have serious implications for Inheritance Tax liability.

"Tenants in Common" means that each Tenant in Common owns a defined share of the property, generally 50%. Upon death the share passes according to instructions in the Will or the Law of Intestacy if the owner is without a Will. The property share can be left directly to other beneficiaries, for example children from previous marriages or split amongst various beneficiaries other than just the joint owner.

Whilst owning your property as "Tenants in Common" may appear more flexible it is important to remember that by defining a share of a property the law will require all signatures of all owners to sell or borrow against such a property. Should one partner, in the event of illness become incapable of handling their affairs, without an Enduring Power of Attorney the person's estate would have to go into receivership before any changes could be made. An Enduring Power of Attorney for both parties should be considered as a necessary document when owning a property in this manner. Read more about Power of Attorney here

It is possible to change the manner in which ownership is registered at the Land Registry, we are able to carry this out on your behalf.