Retirees are being urged to seek legal advice before placing their homes into trust to spare care home fees.
The issue was highlighted by a recent Channel 4 Dispatches programme focusing on claims that care home fees could be avoided by placing homes in trust.
Trusts can enable older people to pass ownership of their property to loved ones – such as their children – without giving up their right to carry on living in it. Should they later need residential care, the property would no longer be included in the local authority’s means test because even though they still live there, it is not legally theirs.
Currently people requiring care, who live alone, need to pay for care themselves if they have assets worth more than £23,250. This includes the value of any savings, investments and their home.
However, Jane Sutherland, a partner at Nelsons Solicitors, warns that the schemes are complicated and should not be entered into lightly.
“Fuelled by concerns over the so-called ‘dementia tax’, a whole industry has grown up around the sale of these schemes, with charges often starting at around £4,000. All too often the schemes may be promoted by people who are not legally qualified and who are giving information without first considering whether it is appropriate for the client,” she explains.
She adds: “Although trust schemes can work, their effectiveness cannot be guaranteed. Your local authority can challenge your exemption from paying care fees – for example if it can show that a significant reason for you putting your property into trust was to avoid care costs and, at the time you did it, you had a reasonable expectation that you’d need care in the future.
“Local authority guidance does say, however, that it would be unreasonable for the council to reach this conclusion if you were fit and healthy when you transferred the property.”
Ms Sutherland also expresses concern that trusts may be being sold to homeowners with sufficient income to cover their care costs, without having to use their home.
“This is a very complex area of law – there are many factors to consider – and it’s highly recommended that you consult a solicitor with experience and expertise in this field. They should look at your particular family, health and financial situation and advise you as an individual.
“This advice should be backed up in a written report and you should then be given time to consider whether and how you wish to proceed. Schemes which claim to give guaranteed protection to protect your home from care fees which sound too good to be true, may well be just that.”
Although the costs of long term care can be huge, Ms Sutherland says that most people will not need it. She says: “Less than 15% of people aged 85 and over live in residential care, and of those who do, the average length of stay is 2.3 years in a residential care home and 1.4 years in a nursing home. In the East Midlands the average annual cost is currently £30,056 for a residential care home and £37,700 for a nursing care home.”