Estate planning / care home fees / wills

[TrickySparkles]

My DP in their 80s are trying to redo their wills. A close friend has recently moved to a care home and they’ve been shocked at how expensive the fees are. Another friend told them she gave 50% of her home to her only DC to secure their inheritance. Currently they own the house jointly and all assets go to the surviving spouse when one dies then when second dies everything left goes to their 3 DC (me and my two DBs).

They are considering changing title deeds so they each own 50% of their house. Their thinking is then only 50% would be considered for care home fees and the other 50% would stay with other spouse. Is that how it works?

They then want to change wills so whoever dies first leaves their half of their house to us 3 DC. The other half remaining with the living spouse and going to the 3DC once they die. I’m not sure all the implications of this eg: does the remaining DP have the right to stay in house given they own only half; could be a DC force a sale to get cash out; could a DC block a sale if the remaining parent wants to sell up (eg downsize to retirement property)? If they sell would the DC be due CGT as it’s technically a second home of theirs (part small ownership).

Im feeling a bit clueless. They’ve started the ball rolling with a lawyer but haven’t got advice as such. Who should they speak to for proper advice on implications?

We are in Scotland (in case different rules) and we aren’t talking mega bucks just average middle class with decent home equity and small amount savings.

Their lawyer should give advice on all of this.

Perhaps you would like to go to the appointment or help them on what to ask?

They need to be careful. What they are considering could be seen as deprivation of assets by their local council if they need to go into care. If it was as easy as they are thinking then everyone would do it. It’s worth paying for proper advice from someone who can be trusted. Most people don’t go into care.

The council will consider that deprivation of assets especially doing it at 80 - should have been considered a long time ago unfortunately. People think it’s only 7 years they can go back but that’s a myth they can go back as far as they see fit

I understand that side of it re deprivation of assets. I’m 50 what would be implications if it was me rather than 80yr olds like my DP? Also who gives the advice as their lawyer didn’t offer much advice other than explain they can change title deeds so both own half the house rather than both sharing all of it.

@TrickySparkles you need proper legal advice. A STEP solicitor is a good idea. https://www.step.org/about-step/public

I know the law is different in Scotland to England.

In England owning a property 50:50 as tenants in common with a will leaving the property to DC but giving spouse/partner a lifetime interest is a valid option.

The lifetime interest can specify that the surviving spouse/ partner can downsize e.g. to sheltered accommodation or if they go into a care home that it is invested to provide an income.

As with anything there are pros and cons so proper legal advice is worth paying for.

What if the children divorce and the soon to be ex spouse wants half of the parents house that belongs to their spouse.
Nasty situation.

This is not deprivation of assets, both parties retain their assets until death but via their will they leave 50% to their DC. The lifetime interest either provides accommodation or income from the deceased parties estate but not the asset.

@TrickySparkles
Lots of pitfalls giving part of the house away. I think the remaining spouse would have to pay rent to the owner of the other half of the house and the owner would pay tax on that income then when the house is sold there would be CGT to pay on any gain on that half.
So you need a good lawyer to explain the implications. A STEP one as someone said as they specialise in this sort of thing.

What's wrong with the appreciation of their home through successive property bubbles paying for their very expensive care? Are they worried that the spouse still in the home will be forced out to pay for the care? That won't happen, so they can leave things as they are.

Alternatively, are they concerned that their assets will have to pay for their care, rather than hard working, cash strapped, younger people through the public purse? That is very unfair. This is one of the main things wrong with this country: the vast division between those with wealth/assets and those with no assets working their asses off.

It’s not deprivation of assets.

"Their thinking is then only 50% would be considered for care home fees and the other 50% would stay with other spouse. Is that how it works?"

The first thing to be aware of is that care home fees will only be an issue for the surviving spouse that goes into care.

If you are married and go into care then the value of the property is disregarded if your spouse or a range of relatives, such as children over the age of 60, are living in the house.

In that case the value of the house is disregarded when calculating liability for care fees.

The issue comes if one spouse dies and then the surviving spouse goes in to care.

This is where this will protect 50% of the home from care fees.

Most homes are owned by a couple as "joint tenants". This is where you both jointly own the whole house (just like a joint bank account). So, when one of you passes away the house automatically goes to the surviving spouse. In Scotland, I believe this is a called a "Survivorship Destination"

If you own the house as joint tenants then the house automatically passes to the surviving spouse regardless of what any will might say.

So, if your DH were to pass away first then you would get everything and it would be quite open to you to get involved with a younger gigolo and then leave everything to your young lover (or the local cat's home charity etc) when you eventually pass away so that your children get nothing.

I'm sure that you wouldn't do anything like that but you do read stories on MN about that happening.

Likewise, you could pass away first and then your DH remarries and leaves everything to his new wife. Again, plenty of stories on MN about this as well.

However, given that your DP are in their eighties I guess that there's little chance of either of those things happening!
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The other way to own a home is as "tenants in common". In this situation you each own a separate 50% of the home and you can leave your own 50% to whoever you like. In this situation it is usual for each spouse to leave their 50% to their children (but you can leave it to whoever you like).

So, if your DH were to pass away first, then you could still give your 50% of the house to your gigolo but you couldn't give your DH's half of the house to him. Likewise if you were to pass away first then it would protect 50% of the house going to any new wife.

In the same way that 50% of the house is protected from any gigolo or fancy woman (or cat's home charity) like this it is also protected from being taken for care fees.

In Scotland I believe that the equivalent of tenants in common will have the phrase "equally between them and to their respective executors and assignees".
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"I’m not sure all the implications of this eg: does the remaining DP have the right to stay in house given they own only half; could be a DC force a sale to get cash out;"

In the will, each 50% of the house is left in trust to the children. The reason for doing this is largely to protect the surviving spouse from being turned out of the home.

There is nothing at all to stop you leaving your 50% directly to your children. Assuming that they're over the age of 18 then your share of the house passes directly to them in your will.

This means that they own 50% of the house and your surviving DH owns the other 50%.

They can then get a court order to force the sale of the house and turn your DH out. (or vice versa if you're the surviving spouse).

The trust stops this from happening. It says that the surviving spouse has the right to continue living in the house until his death (or other event mentioned in the will eg remarriage). This stops them being kicked out of the house by the children.

"...could be a DC force a sale to get cash out"

No, and even if the surviving spouse wanted to downsize which would release some money then the DC are still not entitled to that money at that time. It must be invested until the surviving spouse passes away (and they get all the interest and dividends rather than the DC).

"could a DC block a sale if the remaining parent wants to sell up (eg downsize to retirement property)?"

No, but they may not have to contribute towards a new home. It all depends how the trust is written. If it is written by a competant solicitor then it will likely say something like the Trustees should have regard solely to the interests of the life tenant (or Liferenter in Scotland).

If there is any money released at any point from the sale of a property than that remains within the trust and must be invested.

"If they sell would the DC be due CGT as it’s technically a second home of theirs (part small ownership)."

No, the property is basically treated as though the surviving spouse owned it during that period. CGT will only be relevant if the surviving spouse spends more than three years in a care home (or 9 months if the house is let out while they're in care) and the house is not sold during that time.

Also, as others have said, this is not deprivation of assets.