Simple steps homeowners can take now to protect their assets

Head of April King Legal Paul King explains why some homeowners are doing too li�le, too late to protect their hard-earned assets.

1. Care Cost Fees

A lot of people are still unaware that if they need care in later life, their assets will be means-tested by the local authority to help pay for these services. This goes back to the Community Care Act 1990, which came into force in 1993. If someone requires social care in later life, the local authority will look to use the assets of a person until they get down to a lower limit of £14,250, when the local authority will take over the fees. Paul knows this all too well, after experiencing this personally. “My own grandmother sadly passed away recently at the age of 92. My grandfather had died many years earlier and le� everything to her. When she needed care in the last six years of her life, because my grandfather had le� everything to her, the house and all the estate were counted in the local authority’s means test. Our clients tell us, ‘We’ve worked hard all our lives, why should the local authority get it all?’ Just as she died, she had gone down to that lower limit of £14,250 – and that’s all that her children inherited.” There are many myths about the steps people can take to protect their assets from being used like this. The main one is that a parent should simply sign their house over to the children now, so it won’t be taken into consideration for means testing. That’s just not true. Local authorities will actually look to see if you’ve ‘deliberately deprived’ yourself of an asset by giving property away, going back over any period in time. Sometimes people think if the gift is made seven years prior then the house is safe. Paul King, Head of April King Legal

This is not so as the sevenyear rule only applies to Inheritance Tax and not local authority care. The solution is for couples to simply not leave everything to each other in the first place.

Paul continues: “What my grandfather could have done is leave his half of the house in trust to his children, stating that they couldn’t have it while his wife, my grandmother, was still alive. We call these Property Trust Wills. If my grandfather had le� his half of the house in trust to the children then when my grandmother subsequently received care in her later life she would have only been means tested on her own half of the house, but my grandfather’s half would have been safe. Why should he have to contribute his half when he didn’t receive any care? The important factor is that couples need to act in advance. Once one party dies or loses mental capacity, through a stroke for example, they are no longer in a position to do this legitimate and straightforward type of planning. It is therefore important for couples to act now even if they may not foresee care fees being an issue.” Paul goes on to explain a further important point. Most clients he sees are surprised to learn that remarriage usually cancels a will and makes the new spouse next in line to inherit, ahead of their own children! Protecting your half of the house in this way, he suggests, ensures that your children ultimately inherit when the survivor dies. “Had my grandmother remarried a�er the death of my grandfather the whole estate could have passed sideways out of the family,” says Paul. It’s another important reason for home-owning couples to upgrade to a Property Trust Will.

2. Bloodline Trust Wills

The majority of April King’s clients have already made standard “mirror wills” with other firms before approaching the firm. A mirror will is when a couple leave everything to each other on the first death, then to the children when the second partner dies. But modern family life means these type of wills leave a lot to chance. Explains Paul: “If I have a mirror will leaving everything to my wife and she remarries or goes into care a�er my death then either the new husband or the local authority are likely to inherit most, if not all, of my estate ahead of my children. Even if my children are named in my mirror will it is by no means certain that they will inherit anything. Once again, this is because a remarriage would cancel the will my wife had previously made with me and make the new husband next-of-kin. This o�en comes as a big shock to my clients who had perhaps thought that all was in order and that the family bloodline would one day inherit. The same is true for thinking that their children and/or grandchildren will one day benefit under a mirror will. If any of your children should die leaving everything to their husband or wife and that son-inlaw or daughter-in-law should then remarry, then your grandchildren would be the ones to lose out under the line of inheritance. Worse still, someone else’s grandchildren would be in line to receive the benefit of all your years of hard work! I’ve experienced this in my own family and I’m sure most people have had similar experiences or heard of someone who has. Bloodline trusts will give greater protection to your children.”

Paul continues: “These things can be avoided by having a bloodline trusts will. Under these types of wills your children have complete control and access to the inheritance they receive from you but give added protection from the twists and turns of modern family life. The wording in these wills states that any money le� over on their demise must pass to any children born of them – your grandchildren.”

3. Lasting Power of A�orney

Paul explains how people often get confused thinking that, because they have made a will, their executors can also deal with assets if there is illness, stroke or some other form of incapacity while they are still alive. “Everyone should actually have two documents – a will that deals with their estate on death, and a lasting power of a�orney that deals with their estate during their lifetime,” he says. The lasting power of attorney is a relatively new introduction and is divided into two parts – one deals with finance, the other deals with health and welfare. In many ways it’s similar to a passport; a document that’s registered now and one which can be physically handed to the attorneys should the need arise. It allows the attorneys, perhaps the children, to deal with banks and pension companies etc should their parent become incapacitated, but also to deal with matters such as where the parent should be living and how they receive care. Your attorneys, again perhaps your children, must legally act in your best interests at all times. You can choose a number of attorneys to act, either jointly or independently, and April King advises on the various options available. Couples are o�en surprised to discover that even joint bank accounts can be frozen until the bank sees sight of a lasting power of a�orney document Having a lasting power of attorney removes the burden on children should ill-health happen further down the line. It helps a family deal with bank accounts and so on during a parent’s lifetime and ceases on death. Crucially, you have to complete a lasting power of attorney while they are still in good mental health. If someone becomes ill through say, a stroke or dementia, this option is lost and the family would have to apply for a order from the Court of Protection – a drawn out and expensive process. It is therefore a good idea for clients to plan ahead and remove any future burden from the family. Once again, all adults should be thinking of this, particularly where there are children or a business involved. It’s not just something to think about when you get older, that’s the challenge for us. People think ‘I’m not ill, why do I need to make a power of a�orney?’

But they’re missing the point. This is a document that has to be done

in advance. Paul adds: “The next part is to appoint the a�orneys, your children. Don’t forget, your children can be the executors of your will and a�orneys as well. The lasting power of a�orney remains in place until you die unless you want to cancel it. Once it’s registered, you don’t have to worry if you then develop some debilitating illness. A burden has been removed from the family at an already difficult time.”