Planning for Later Life: A Delicate Balance

There are many issues to consider in later life planning but having the right documents in place definitely helps.   With an increase in diagnosed dementia it is important that early consideration is given to planning as mental capacity is required for legal documents to be valid.  Protecting your home and your loved ones needs careful thought.

Can’t I just give my home to my children now?

There are two issues here, one is inheritance tax and one is care fees. From an inheritance tax point of view you can gift your house to your children but you would have to live 7 years before this would mean no inheritance tax was due on the gift if you die. However, this just isn’t viable for most people as you cannot retain a benefit from the property, meaning you cannot continue to live in it after you have given it away, unless you pay a full market rent.

From the point of view of care fees, the Local Authority will invariably see this as intentional deprivation of assets and will assess you as if you still own the property.

Then how can I protect against care fees?

In short, you can’t completely. However, you can certainly improve the situation.

Couples who act now can protect their own share of assets from care home fees in a way that is completely legitimate and acceptable to the Local Authority. 

First, it is important to ascertain if the family home (and any other property) is held as Joint Tenantsor Tenants in Common. If the home is held as Joint Tenants, each person owns a 100% indivisible share. When one dies, the other continues to own 100% of the property. If however the property is held as Tenants in Common, each person owns a divisible share of the property (e.g. 50%) which they can leave to whoever they like. If the couple owns the property as Joint Tenants, it is possible to sever the tenancy so that it is instead held as Tenants in Common.

The couple should then revise their Will so that each leaves their share of the property on trust to the other for life. After the first person dies, the surviving spouse or civil partner will have full use of the property for life. They can even move home with the permission of the trustees. Should they need care, the deceased partner’s share will not be taken into account for means testing.This is because they do not own the share outright – they only have a life interest.

Powers of Attorney

Anyone over 18 should have a power of attorney in place.  If there is one thing certain in life, it’s that nothing is certain! If you had a serious accident or stroke, or you developed dementia, you may not be able to manage your finances or make decisions about your life.  A lasting power of attorney gives someone of your choice the ability to act on your behalf, should you be unable to act yourself. As with other legal documents, when making a power of attorney you must have the required mental capacity, which is why it is important not to wait until it is too late.

If you do not have capacity a deputyship is required for anyone to take over your affairs. This is a much more complicated process with high initial costs and ongoing fees. 

There are two types of Lasting Power of Attorney – one for financial decisions (including property) and the other for health and care decisions. Both must be registered before they are valid.

Later life planning, power of attorney.

Advance Directives

Sometimes known as a living will.

When we become ill there is often a sense of loss of control over our lives. Our desires and wishes may become secondary to well meaning caregivers who simply do not know how we would like to be treated; it isn’t something we are very good at talking about as a general rule. 

An advance directive is a very cost effective way of making your wishes known, giving peace of mind to family members who may have to make tough decisions.  If you are unable to make decisions about your care, medical practitioners and your caregivers must consider the wishes you have already documented on the advance directive. This gives you some control over future treatments and care plans.