With Inheritance Tax (IHT) receipts reaching record highs between April 2024 and March 2025, and the cost of long-term care rising, it is important to plan for how you might pay for your future care. What steps can you take to protect your estate for future generations?
On average, the cost of care in the UK exceeds £1,000 per week, depending on the level of care required and location. For individuals whose combined capital and income (e.g. assets, pensions and savings) is over £23,500, they are expected to cover the whole cost of the care. For individuals who fall below this threshold, there are local authority funding options to assist covering the cost of care.
With high weekly costs, assets can rapidly deplete. This can result in less inheritance for your loved ones and could potentially limit the choice of care provision. Effective estate planning can protect assets and ensure long-term financial stability. We look at life interest trusts and severing joint tenancies in particular.
For more help with planning for your future care costs, you can contact our Wills, Probate and Estate Planning solicitors today. Call us on 0800 988 7756 or fill in the enquiry form and our team will call you back.
| A valid will
Having a legally valid, professionally drafted will is the foundation of any good estate plan. A will ensures that your wishes are clearly documented and that your assets are distributed in line with your intentions. Without a will, your estate will be distributed according to the Rules of Intestacy, which may not reflect your wishes and can create unnecessary complications and costs for your loved ones.
However, while a will is crucial, it may not be enough on its own, especially if you’re concerned about protecting assets for future generations or shielding them from care home fees.
| Property ownership
One area that is often overlooked is how you own your home. In the UK, property can be jointly owned in two ways:
- Beneficial joint tenants: Both owners jointly own the whole property. If one dies, their share automatically passes to the other, regardless of what their will says.
- Tenants in common: Each owner holds a specific share (typically 50/50), which they can leave to whomever they choose in their will.
| Why is this important when it comes to planning for future care costs?
If you own your home as joint tenants and one of you needs care in later life, the entire property may be taken into account during financial assessments for care fees. This could significantly reduce the inheritance available to your loved ones.
Severing the joint tenancy is one way to plan for future care costs.
By severing the joint tenancy and converting ownership to tenants in common, each person’s share becomes distinct. This means:
- Only your share of the property can be considered for care fees, potentially protecting the other half.
- You can leave your share to children or other beneficiaries, rather than it automatically passing to the other owner.
- You gain more flexibility in structuring your estate for Inheritance Tax planning.
Severing a joint tenancy is a relatively simple process involving a notice to the Land Registry. It’s often paired with a Declaration of Trust, which sets out how the property is owned and ensures clarity for all parties.
| Consider a Life Interest Trust in your will
Another effective strategy is to include a life interest trust in your will. This allows you to leave your share of the family home in trust for your children or other beneficiaries, while still giving your partner the right to live in the property for life.
A life interest trust can:
- Protect the value of your estate from being eroded by future care costs.
- Ensure that your assets eventually pass to your chosen beneficiaries.
- Offer peace of mind that your spouse or partner will be able to remain in the home.
| Deliberate deprivation of assets
When planning your estate, It is important to give special attention to potential claims of deliberate deprivation of assets.
If the Local Authority believes you have deliberately reduced your assets to avoid care costs, they can still include those assets in their financial assessment.
Examples of deliberate deprivation of assets include:
- Transferring a property to someone else
- Gifting a substantial amount of money to someone else
- Substantial spending out of character
- Placing assets into trust which cannot be revoked
- Converting assets into personal belongings which are disregarded for the purposes of the financial assessment
| Local Authority Considerations
Evidence of these doesn’t always mean that it will be deliberate. When considering whether a disposal of assets was an act of deliberate deprivation, the Local Authority should consider:
- Whether a significant motivation was avoiding the care home funding;
- The timing of the disposal; and
- Was there a reasonable expectation of needing to contribute towards the costs of care.
There is a lot to think about, and there is not ‘one size fits all solution’. But our specialist Estate Planning and care home fees solicitors can help you. Call us on 0800 988 7756 or book an appointment online to discuss planning for your future care costs.
