First things first, let us acknowledge that the need for specialist care can befall anyone at anytime however, it has to be said the probability does increase as we get older. It is estimated that approximately 1 in 6 women and 1 in 5 men experience the need for care during their lifetime. If you happened to catch the BBC Panorama programmes earlier this year (2006) we are sure that like us, you thought how scandalous it is that so many people are caught in the care cost trap, with something approaching 40,000 homes being sold each year to fund a service most of us will have grown up believing would be delivered free of charge in our most vulnerable years. 

In reality, we have found the threat to the family home becomes more so when a parent is left on their own, as whilst together a spouse or partner will normally endeavour to care for the other until the task becomes too much for them. It is when the family is unable to provide the care and protection for their elderly or infirm that the reality comes home to roost, especially when they discover the average cost of care is in the order of £20,000 per year, not surprising then that it doesn't take long to deplete an estate.

So, what can be done to address this potential loss?

There are basically four options, two which do not have any real impact on your everyday position as they are paper transactions. The others would we recommend require deep consideration and consultation as one could be to sell the property, go into rented accommodation and have a really good time on the sale proceeds. In other words, spend what you have before someone else takes it! Most people though don't want to do this as they feel it's a bit drastic and in any case they would like to keep the family home for their own comfort as well as it being something they can leave to their family. A similar result might also be achieved via a home reversion or equity release scheme, but with the benefit of remaining in your home whilst receiving additional income and in part or in whole, depending on the amounts and individual circumstances, leaving something too.

Another option is to simply reduce your holding in the property as assuming you are part of a couple, it is likely that presently your 'interest' in your dwelling is registered under Joint Tenancy. This means you are both each deemed to own 100% of the property, sounds daft, how can two people each own 100% of anything! It's just the law of ownership and in days of yore it was fine and can still on occassions make sense. However, in these increasingly complicated days, it is becoming an increasingly negative and obsolete way of registering property ownership.

How do you reduce your interest? Well, for one, if your property ownership is registered as a Joint Tenancy, you can change this to Tenancy in Common. This means you are both recognised as owning your share of the property in your own right, which would normally 50% although it can be any percentage.

The result is that any creditor such as a care provider can only lay claim to that portion of the property which you own. As an aside, or just as importantly, depending on your position is that you can also bequeath your interest to whomsoever you wish, which means that through a correctly written Will you can leave your interest directly to your children, thus protecting them in part at least from the consequences of your spouse/partner remarrying after your demise, whether or not they write a new Will and you can also protect your spouse/partner's position during their lifetime.     

NB. If you are in a relationship and the property is just in one name, the above position can still be attained however you would have to utilise alternative legal vehicles.   

The final option, whether the property is registered or not or in single or joint names is to give the property away, not to any individual(s) but into a trust. The benefit being, as no individual owns the property, no claim can be made against it by any creditor nor can it be bequeathed independently by either partner as the terms of the trust as set out by the donor would determine as to whom it would pass and when, normally on the demise of the last surviving donor. The terms of such a trust would normally be that the donors retain the right to dwell and utilise the property as they have done and that they can continue to do so for so long as they should wish to.  

NB. If the trust option is to be considered as a possible safeguard against care costs, it must be implimented whilst the donor(s) are still in good health, that there has been no hint of the possible need for care; if not, then the trust will no doubt fail.          

Oh yes, there is allegedly another option. Occasionally we have clients site people they know of who because of their concern about the possibility of care, or Inheritance Tax, simply give their property to their children. In the majority of cases we would strongly recommend against this! There are a number of reasons as to why; -

As if you sign over your house to your children during your lifetime and continue to live in it:

1] The local authority can ignore the transaction without limit of time if they consider it was done to avoid paying long term care fees.

2] The value of the house will be added back into your estate for the calculation of Inheritance Tax.

3] Unless your children live with you, the house will be subject to Capital Gains Tax on its increased value from the date of the transfer.

4] If your children become involved in a marital dispute or financial difficulties, your home may be considered to be part of their assets.

5] Income Tax will be payable on the rental value of your home, even if you are not actually paying rent.