FAQ – Care Fees Planning


Would a trust in my will reduce liability for care fees?

A trust can be very useful if you have a spouse or partner and you jointly own your home. You can make each make a will which includes a ‘life interest trust’. This may reduce the amount you have to pay towards future care fees.

The trust will be set up when the first of you dies and at that time the deceased’s half of the home will be transferred into the trust. The surviving spouse or partner will have the rent free use of the property while he or she remains alive.

Do I need to do anything else?

Jointly owned houses or flats are usually held as “joint tenants”. This means the property automatically passes to the survivor when the first joint owner dies (regardless of the terms of the will). For the trust to work you must be “tenants in common”. This means that on the first death the half share of the property can pass into the trust. Fortunately a joint tenancy can easily be converted to a tenancy in common.

How does the trust work?

If the surviving spouse or partner has to move into residential or nursing home care then an assessment has to be completed so the local authority can work out how much the resident needs to pay. The half share of the home held in trust will not form part of the assessment.

What happens if the house is sold?

One half of the proceeds of sale will be due to the surviving spouse/partner and will have to be used for payment of care fees. The other half of the sale proceeds will be paid into the trust and will be preserved for the children or other beneficiaries under the will.

The money in the trust will be invested and the interest will be paid to the surviving spouse/partner under the terms of the trust.

Can money be released from the trust if necessary?

Once most of the survivor’s own funds have been used for care fees the local authority will start to make a contribution.  However this may not be enough to cover the full cost of care.  The trustees can be authorised to release money from the trust to pay the shortfall.

What about Inheritance Tax?

The life interest trust will not usually affect your Inheritance Tax liability at all.

Richard Mead

Inheritance Protection

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