FAQ's and Myths:
1. If I put my house as tenants in common will it reduce my care fees?
When you own property, you generally own it as:
- • joint tenants (where the owners own the property without any distinct shares, and when one of them dies it automatically accrues to the surviving owners regardless of anyone’s Will provisions), or
- • tenants in common (where the owners have distinct shares that can be equal or unequal).
Changing your property to tenants in common, or joint tenants, has no effect unless:
- • you create a trust in your Will (please see here for further information), so that half of your house can be protected; or
- • you make your house tenants in common in unequal shares (eg 60-40, or even 90-10). So that if the person with the lower value share goes into care, they own less of the property.
But even this is not always guaranteed to work, as the Local Authority consider other factors in how you own property. Otherwise, in both cases, the Local Authority will deem you to own a half share in your property, regardless of whether it is tenants in common or joint tenants.
2. lf I give my property to my children I won’t have to pay care fees?
The Local Authority have the power to overturn something you have done if they feel you have done it to deliberately deprive yourself of capital, or a benefit of some kind, or income. It’s called ‘deliberate deprivation’.
They look at your intentions, your reasons for doing something, and when you did it.
If you cannot provide evidence for why you gave your property away for nothing, then the Local Authority can argue that you did it to minimise or avoid your liability for care fees. They can then ignore whatever you have done, and calculate your care fees as though you own the asset anyway.
3. If I give my property away and don’t go into care for seven years I won’t have to pay care fees?
The seven year rule applies to Inheritance Tax (IHT), where you make a gift and if you survive 7 years it is no longer part of your estate when it is valued for IHT.
There are also some rules relating to insolvency, and bankruptcy, which have specific time limits on them.
But in relation to care fees, there is no fixed time scale. As a general rule the Local Authority is actually only supposed to go back six months but they have the ability, where something is suspicious to them, to investigate as far back as they want.
4. A company called me recently and said that if they put my property into a Trust, I won’t have to pay for my care fees. Is this true?
This probably won’t work.
There are numerous private companies (not Lawyers) who cold call people, leaflet drop, and generally try to persuade people to pay around £3,000 for a trust on the grounds that it will guarantee that the property cannot be considered for care fees assessments.
If you are contacted by one of these companies then please seek some qualified legal advice before going ahead with anything. We have known clients have large unexpected tax bills, and some clients even lose their right to stay in their own property.
And the fact is that the Local Authority, as we have mentioned above, will still be able to ignore these trusts if they find them suspicious.