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"Dementia Tax": Planning for the future
“Dementia tax” is a term often used to describe the increasing cost of care home fees in the UK. Those with dementia often face the highest costs of care in comparison to all other groups of adult social care but, unlike the name suggests, “Dementia tax” is not limited to dementia.
Adult social care is means-tested, and usually a person’s home is taken into account when calculating this. The Local Authority will only cover the full cost of care for people who have capital assets worth less than £14,250, and will contribute towards care for those with assets worth between £14,250 and £23,250. Unfortunately, for those with assets worth over £23,250, the Local Authority will not contribute to their cost of care. For many people, this means they are faced with the upsetting reality of having to sell their home. It is no wonder people are taking steps in an attempt to avoid care home fees
How can i defer care home fees?
Those that do not wish to sell their home may be given the option to defer their care fees until after their death. The cost of such care is then deducted from their estate upon their death. Aside from wanting to preserve their property during their lifetime, however, many people also want to ensure that as much of their estate as possible goes to their loved ones, rather than having it consumed by care fees.
Including a life interest trust in your will can help mitigate the impact of care home fees. Many couples hold their property as joint tenants, meaning that when one dies, their share will automatically pass to the survivor, who subsequently becomes the sole owner of the property. Inevitably, this will increase the value of the survivor’s assets when calculating any means-test, and therefore the possibility of having to fund their own care home fees in the future.
Protecting property for a loved one
By severing a tenancy and holding a property as tenants in common, the shares in that property are distinct and separate. When one person dies, their share will not automatically pass to the survivor, but will pass in accordance with their will. By including a life interest trust in their will, they can allow their partner to effectively “borrow” their share of the property and live in it during their lifetime, with the capital going to another beneficiary upon the survivor’s death. That share of the property is held on trust during the survivor’s lifetime and does not belong to them; it will therefore only be the survivor’s share that can be used for assessment of and/or payment of care home fees.
If you would like more information on this, please ask to speak to a member of the team on 01206 217380.