How much is it going to cost when the time comes for you to move out of your house and into a care home? It is difficult to predict quite how much care home fees may have risen by the time you need to make the move, but the scale of the likely cost might be alarming.
A report in the Daily Mirror, for instance, suggests that the average cost of fees already exceeds £738 a week – or some £40,000 a year. Meanwhile, a report by the online magazine Health Insurance and Protection Daily, (December 2015), suggested that annual costs are likely to be more than £51,800 by the year 2035.
Yet if you own your own home, the means testing conducted by local authorities assessing your qualification for financial help, is likely to result in your having to sell the house to pay for your long-term care.
For this reason alone, and to ensure that your children enjoy the inheritance you intended, you might want to consider putting your house in Trust to manage those care home fees – when the home is in Trust, you no longer own it, so are unable to sell it to raise the funds for care home fees.
How to insure a house placed in Trust
Although there is nothing intrinsically complicated about insuring a home placed in Trust, there are some important considerations about what is after all something of a niche insurance product. Therefore, you might want to consult a specialist provider of such cover.
The overriding concern is likely to be identifying the owners of the property with an insurable interest in it. Depending on the terms of the Trust you might still be living in your home and may also be one of the Trustees. But when placed in Trust your property is owned by the Trust, a separate and distinct legal entity.
So that adequate protection is maintained, therefore, property insurance needs to be a contract between the insurer and the Trustees – and it is going to be the Trustees who assume responsibility for the cost of any loss or damage if adequate insurance is not arranged.
For the efficient management of the insurance, all correspondence with the insurer – about annual renewals or any other matter – needs to be through the trustees’ address, in the name of the Trust.
Additional benefits of a Trust
With your home safely placed at arms’ length in the haven of a trust and the property properly insured, there are other benefits that may come with setting up a Trust:
- it may be possible to reduce your liability for inheritance tax, for instance; or
- reduce the costs of probate if a large part of your estate is already in other, separate ownership; whilst
- a Trust may also help to ensure that assets pass to your children even in the event of your surviving spouse subsequently deciding to remarry.
In addition to what might be the principal benefit of managing highly expensive care home fees, there are other potential advantages in the creation of a Trust – provided that any property transferred to it is properly and adequately insured.