Protective Property Trust (PPT)
In recent years, it has become increasingly apparent that the State will only provide for those with little or no savings or assets. Everyone else will be expected to pay at least part, if not all, of his or her own costs. Currently, anyone with assets in excess of £23,250 (this includes the family home) would not be eligible for any state help with their residential care fees. If you have more than £14,250 but less than £23,250 you would only be entitled to partial assistance.
The net result is that anyone who owns their own home is unlikely to receive any assistance even though they do not have large amounts of cash assets.
Even if you don't have the cash readily available, the Department of Social Security can still place a charge against the family home, which allows them to recover the moneys owing when the property is eventually sold. This equates to over 70,000 homes per year sold to fund long term care for the elderly, which reduces the inheritance or depletes to nothing tobe passed on to their descendants.
It is illegal to transfer your own property to relatives with the aim of avoiding paying for long term care as is tax evasion, but there are legitimate ways to ensure that you take advantage of all the allowances available to reduce the amount of tax payable by your beneficiaries and to protect assets.
Average residential care fees start in the region of £500 per week * so it is clear how quickly assets can be eroded. The DSS has often become the sole outright owner of the family home after the death of an elderly parent who had been living in a nursing home. But there is a solution.
# The deceased's share in the property is fully protected for the beneficiaries, so even if the surviving partner remarries, the children's inheritance is protected.
# The surviving partner does not own the deceased's share of the property. If that person then goes into residential care then only his/her share in the house can be included as part of the assessment of their contribution to care costs.
# The surviving partner is given a 'Life Interest' in the deceased's share of the property, so they are entitled to live in that property for the remainder of their life and the property cannot be sold without their permission.
It is highly probable that one or even both partners in a household will require long-term residential care at some point in their lives. This is particularly so given that it is becoming much less common for elderly parents to move in with their children these days.
A 'Property Trust' is based around three basic elements: the basis on which you own your property, the Trust terms, and your Wills, which contain the Trust instrument.
The Property Trust can only be created whilst both partners remain alive and the property must be owned as Tenants in Common. The Trust instrument is then included in both Wills but does not come into force until after the death of the first.
The surviving spouse, under the terms of the Trust, has the right to remain living in the property for the rest of their life. On the death of the second spouse the trust comes to an end and the property passes absolutely to the beneficiaries.
* Telegraph Dec 2008 “Age Concern the average residential home costs £500 a week - and for those needing nursing care this can rise to at least £700 a week.”