Pay for care – but pro­tect the home

This reader wants to sup­port his wife and chil­dren. Amelia Mur­ray views his op­tions

The Sunday Telegraph - Money & Business - - Money -

James Green’s dilemma is likely to be one faced by many peo­ple his age: his wife Pat, 72, has de­men­tia and has been in care for a year. Her care costs £725 a week, most of which is paid by Not­ting­hamshire coun­cil. Mr Green con­trib­utes £100 a week.

Mr Green, 73, a re­tired head teacher who used to write ed­u­ca­tional books with his wife, wants to make sure she is taken care of, what­ever hap­pens to him. But he would also like to leave the three-bed Twen­ties house he lives in, which is worth £185,000, to his chil­dren.

He un­der­stands do­ing both might be dif­fi­cult be­cause the prop­erty is owned jointly and, as he does not have power of at­tor­ney for his wife, he can’t make any fi­nan­cial de­ci­sions on her be­half. If he dies first, Mrs Green will in­herit the house and it may have to be sold to fund her care.

Mr Green pays around £650 a month to­wards the £14,500 mort­gage, which he plans to clear by the end of this year. He re­ceives just over £6,000 a year from the state pen­sion and £18,806 from his teacher’s pen­sion. He also re­ceives roy­al­ties from his publications; in a good year he can earn around £3,000. He has £2,500 in cash and is able to save around £500 a month.

He is mind­ful of fu­ture ex­penses, such as fu­neral costs, and wants to know how he can max­imise his sav­ings.

Pa­trick Con­nolly, char­tered fi­nan­cial plan­ner from Chase De Vere, said:

When de­ter­min­ing the con­tri­bu­tion that lo­cal au­thor­i­ties may make to­ward care costs, it is the in­di­vid­ual re­quir­ing care who is as­sessed. With a mar­ried cou­ple, the spouse’s cap­i­tal and in­come are ig­nored.

Mrs Green’s share of their prop­erty is also ig­nored as Mr Green still lives there. Mr Green has suf­fi­cient in­come to meet his liv­ing ex­penses and it makes sense to keep his fi­nances as flex­i­ble as pos­si­ble.

He does not know when he will need money to pay for house main­te­nance, fu­neral costs or any other short-term re­quire­ments, so he should con­tinue to build his cash sav­ings in easy-ac­cess ac­counts. As Mrs Green no longer has ca­pac­ity she can­not es­tab­lish a power of at­tor­ney. This means that she is un­able to en­ter into a trans­ac­tion or do some­thing that may have le­gal con­se­quences.

The Court of Protection will look after the in­ter­ests of those who have lost men­tal ca­pac­ity, haven’t set up an en­dur­ing or last­ing power of at­tor­ney and have as­sets that could be used for their ben­e­fit, such as Mrs Green’s share in the prop­erty.

The court will typ­i­cally ap­point a “deputy” to man­age the in­di­vid­ual’s as­sets. This deputy could be ei­ther Mr Green or some­one ap­pointed by the court. It is likely that the court would need to ap­prove any ma­jor fi­nan­cial ac­tions be­fore they are taken.

If Mr Green wants to ei­ther sell the prop­erty or take out equity re­lease, oth­er­wise known as a “life­time mort­gage”, he would need to show that half of the pro­ceeds were for his wife’s ben­e­fit.

He also needs to be very care­ful if he re­leases cap­i­tal as the lo­cal au­thor­ity may then take this into ac­count when as­sess­ing Mrs Green’s fi­nan­cial cir­cum­stances. As the money will no longer be in the prop­erty it will no longer qual­ify for the spousal ex­emp­tion.

While Mr Green would like to pass on his prop­erty to his chil­dren, his op­tions are lim­ited. A court-ap­pointed deputy wouldn’t be al­lowed to sim­ply give Mrs Green’s share of the prop­erty to her chil­dren.

If Mr Green died first then, as the prop­erty is held on a “joint ten­ancy” ba­sis, it would au­to­mat­i­cally trans­fer to his wife. The lo­cal au­thor­ity would then re­assess Mrs Green’s fi­nan­cial sit­u­a­tion and would prob­a­bly stop pay­ing her care costs.

The prop­erty might have to be sold or a de­ferred pay­ments agree­ment made, where the lo­cal au­thor­ity places a le­gal charge on the prop­erty.

If Mrs Green dies first, Mr Green could give the prop­erty to his chil­dren on his death.

He could give the prop­erty while he is still alive, al­though there are a num­ber of big caveats to this, in­clud­ing that he must no longer get any ben­e­fit from it.

Also, if he needs care soon after mak­ing the gift, the lo­cal au­thor­ity may treat it as de­lib­er­ate as­set de­pri­va­tion.

Owain Wright, founder of Care Fund­ing Guid­ance, said:

Mr Green’s sit­u­a­tion shows the im­por­tance of sort­ing out a last­ing power of at­tor­ney (LPA) be­fore ca­pac­ity is lost. Now the only course of action is to ap­proach the Court of Protection and ask to be ap­pointed as a deputy. It’s a sim­ple process but takes around six months and the costs will be at least £1,500. In com­par­i­son, an LPA costs £300-£600.

Once Mr Green is a deputy he will have the power to sell the prop­erty or re­lease equity, al­though this will prob­a­bly be with court su­per­vi­sion.

Mr Green should also re­mem­ber to take out an LPA for him­self.

The prop­erty is­sue is go­ing to raise a moral dilemma: does Mr Green want what’s best for his wife or his chil­dren? Mr and Mrs Green own their prop­erty as joint ten­ants, so if Mr Green dies first his wife will in­herit it and will prob­a­bly have to pay more to­wards her care.

A “care fee an­nu­ity” could be con­sid­ered in this sit­u­a­tion, which would place a cap on the to­tal cost, en­sur­ing that more of the es­tate goes to the chil­dren. The an­nu­ities are in­di­vid­u­ally un­der­writ­ten and the cost will vary ac­cord­ing to age and health. A rough es­ti­mate can be worked out by mul­ti­ply­ing the an­nual in­come you need by four.

Mr Green could also change the own­er­ship of their prop­erty to ten­ants in com­mon. If he died be­fore his wife he could leave his half of the house to their chil­dren or a trust. As­sum­ing that the chil­dren didn’t want to sell their half, Mrs Green could not sell her half, and the value of her share for the pur­poses of the means test would there­fore al­most cer­tainly be nil.

If this worked, Mrs Green’s care would re­main state-funded and Mr Green could leave in­struc­tions in his will en­sur­ing that the chil­dren agree to pay the top-up on his wife’s care.

It would mean that Mrs Green re­mained in what was prob­a­bly a lower-qual­ity care home than she could oth­er­wise af­ford, but of course the chil­dren would ben­e­fit greatly.

Usu­ally if you make a sub­stan­tial gift the lo­cal au­thor­ity can later ques­tion if you were de­lib­er­ately de­priv­ing your­self to avoid hav­ing to meet your own care costs.

With a ten­ants-in-com­mon ar­range­ment, how­ever, the gift passes as a re­sult of the death of the first part­ner and can­not there­fore be ques­tioned by the lo­cal au­thor­ity.

James Green is keen to en­sure that his wife is taken care of but also wants to leave their home to his chil­dren

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