I had an interesting conversation with a financial advisor this week. He told me one of the best products he’s currently offering is the concept of protecting assets from the Government. This is called placing a property in trust to avoid care home fees.
I initially thought the guy was nuts and it was a con, but I listened on.
Let me paint you a picture. You’re 75 years old and in need of nursing care full time. Your family are helping to organise a suitable nursing home in the local area. The nursing home selected is perfect and they have a spot open, when the nurse turns to you and says, “how will you be paying for this”? Ah, a very good question.
Residential nursing care is free for some people in the UK, but only if they have no available money to pay for their own care. The majority of people in nursing homes won’t have any money and the Government will pay for their care. However, if you have money, or an asset, you have to use this first.
But, what happens to the inheritance?!
Inheritance: Protect Your Property
Financial advisors are helping people by putting their assets in a will. But, it’s not just any will – it has to be a will in trust. What happens is the property is transferred to the children who will benefit from the asset, however, the children do not have any rights to sell the property while the original home owner (usually the parent) is still alive.
With the average house being valued at £238,293 in the UK and the cost of care now costing more than £30,000 per year. After 8 years of care the money from the house will be diminished. So no inheritance. Furthermore, it took 30 years to pay the house off and it’s spent in 8!
We spend plenty time and money protecting our assets but it’s something I’d never thought about. When I looked into it further, a person on benefits for all their life and never worked 1 day who lives in social accommodation life will get the same level of care but not have to sell anything.
House In Trust: Is It Right?
You work hard to buy the things you want and help build a future for your children, but the Government decide that you can’t keep assets when the worst happens. I actually agree that people should have to sell their house, stocks, shares etc to pay for themself. I mean, why should the UK Government pay for your elderly care?
On the other hand, I also believe it’s unfair that people who have never pay into the system and instead spent 40 years swallowing up benefits and financial support can then get the same level of elderly care without having to give up anything.
Ultimately, if I were in a situation where I owned an asset in full – hopefully my mortgage in 15 years will be repaid in full – I’d want to protect it for my children. I know that’s not the attitude to have, but it’s the truth. So, I’ll probably place my asset in trust.
What would you do? It’s a morale and financial dilemma is it not?
House prices http://news.bbc.co.uk/1/shared/spl/hi/in_depth/uk_house_prices/html/houses.stm
Average cost of care: http://www.telegraph.co.uk/news/uknews/9525754/Care-home-costs-soar-across-retirement-Britain.html