Care home fees can be much higher than many people expect. Understandably, this means there is often a desire to minimise those costs. The way owning property as tenants in common and care home fees works can be a very beneficial interaction to understand.
Because if you own property as joint tenants, it can create problems when your local authority calculates your care home fees. The most prominent of these is that you may essentially be required to sell your home to cover the fees.
This makes it important to explore the best way to own property if you want to ensure the care home fees you have to pay are fair and affordable. Let’s walk through how this could work:
The Two Ways To Own Property – Jointly Or Tenants In Common
There are two ways to own property in the UK – as joint tenants or as tenants in common.
Joint tenants own a property equally. They have a 50% share each and, among other features of this arrangement, have no say in what happens to that share. They cannot leave it to someone else in their will, for example. The surviving tenant will always inherit full ownership.
Tenants in common, by contrast, own specific shares of a property. These can be unequal and they can be changed during the course of ownership. They can also be left to beneficiaries other than the surviving partner in a will.
These and other differences between being tenants in common and joint tenants have a large impact when it comes to how your capital is assessed for care home fees.
What Happens With Jointly Owned Property And Care Home Fees?
Your local authority will carry out means testing (an assessment of your finances, including your assets such as property, savings, and income) to determine how much of your care home costs they will cover. You may receive:
- Full funding – if your total capital is valued below £14 250 in England (£18 000 in Scotland and £50 000 in Wales) your care home costs will be fully covered.
- No funding – if your total capital is valued above £23 250 in England (£28 750 in Scotland and £50 000 in Wales) you will be required to self-fund your care home costs.
- Partial funding – if your total capital is valued between those figures in England and Scotland, you will qualify for partial funding.
Jointly owned property may or may not be assessed as part of your means testing for care home fees depending on the specifics of your living situation.
Means Testing For Care Home Fees – Is Jointly Owned Property Always Included?
Jointly owned property is not always included in a means test for care home fees. The common examples are:
- Property still occupied by your partner – if the other joint tenant of the property still lives in your home, it will not be included in the means test.
- Property still occupied by separated or divorced partner – the property will be included in the means test. The only exception is if they are caring for your child under 18 or a disabled relative or one over 60 years of age also living in the property.
- Partner separated and no longer living in property – the property will be included in the means test. If you’ve paid off your mortgage, your local authority will assess based on half of the property’s value.
- It’s a temporary situation or you need home care – if you are entering a care home for a short period or need home care, your property will not be included in the means test. This is covered by something called the “disregard period” that lasts for 12 weeks after you enter a care home.
Can I Gift My Home To My Children To Avoid Care Home Fees?
Many people imagine that gifting their property to their children may be a way to avoid inheritance tax or it being assessed as part of the means testing for care home fees.
Unfortunately, this approach often falls afoul of what is known as “deliberate deprivation of assets”. This is essentially when your local authority recognises you have deliberately tried to reduce your assets to pay lower fees and does something in order to balance it.
Should I Change From Jointly Owned To Tenants In Common To Protect My Share From Care Home Fees?
Owning property as joint tenants is popular with couples as it feels like a natural way to proceed at the start of what will hopefully be a happy life together.
As touched on above though, being joint tenants means the surviving tenant will automatically inherit full ownership of the property if one tenant passes away. If the survivor then needs to go into care, the full value of the property will be assessed as part of the means test.
A better solution can be to change from jointly owned to tenants in common. This allows each tenant to leave their share to someone else (and, often better, to a trust) in their will. This can enable the surviving tenant to continue living in the property for life and only be assessed for half the value if they need to go into care later.
Of course, major decisions like this should never be made without specialist legal advice. Tenants in common can be a smart way to make care home fees much fairer, but it’s always a good idea to talk to an expert first.
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