Planning for long-term care

long-term care

As many of our clients grow older, they begin to focus on how their estate will be dealt with after their death. They tell us that they want to leave as much as they can to their family and are worried what might happen to their assets if they find themselves in long-term care.

Because of this, we help our clients to focus on their options. One of the key elements of forward planning is the creation of a Will. How this is structured can have a significant effect on how your assets are assessed and how your estate is dealt with.

Having discussed options with us, many of our clients have decided they would like us to prepare a Trust Will so we thought we would explain what it is and how it works.

As the name suggests, a Trust Will sets out your intentions as you would find in any normal Will but also contains some trust provisions.

Perhaps the best way of explaining how this works is to give you an example.

Let’s say that a couple own their own home in their joint names, have some savings of their own and other savings jointly with their spouse or partner. In normal circumstances, when, say, the husband dies, his half share in the house, a half share of any joint accounts and the whole of his own savings, insurance policies and other assets he alone owned would make up his estate. If he hadn’t made a Will then, most of the time, his interest in the house would be transferred to his wife along with any money or other assets (there are, of course, Legal Rights of Children which we have discussed in an earlier article. You can view that by clicking here). If the husband had a “simple” Will, it would usually provide that all his assets transfer to his wife on death and then, on her death, to any children.

Either of these scenarios can cause a problem going forward because that means the wife now owns even more assets that have to be distributed on her death. Importantly, the value of her assets is taken into consideration if she should need any long-term care.

If we consider the provisions of a Trust Will, using the same example, here is what would happen.

If the husband were to die first, then his half share in the house would be held in liferent for the benefit of his wife. She would have the right to continue to live in the house or any replacement house but would only own her own half share in the house. The half share of the house owned by her late husband would be held by the Trustees appointed under her late husband’s Will.

To continue with this example, if the wife was subsequently to go into long-term care, then the Local Authority cannot force the sale of the house and so long as the Trustees do not sell the house while the wife is in care then the value of the wife’s one half share of the house would be fairly nominal. This would avoid the house having to be sold and used to pay for the wife’s long-term care costs.

The husband’s moveable estate (i.e. savings and investments in his name or his half of any joint investments) would again be held in liferent for the wife so she would receive interest from her late husband’s savings and investments. There would also be provision for the Trustees to advance to the wife money from the liferented estate should that be necessary. If however funds remain in the Trust, then those funds could not be taken into account when calculating the wife’s capital in respect of any financial assessment that may be carried out to determine how much of her capital is at risk to contribute to the cost of long-term care.

On the subsequent death of the wife, the estates of the husband and wife would be fully wound up and the assets distributed in accordance with the terms of their respective Wills.

One attraction of a Trust Will is that there is no transfer of assets during lifetime and that means the control of the assets remains with the husband and wife – and, importantly, the local authority cannot accuse the couple of deliberate lifetime deprivation of assets for the purpose of avoiding care costs.

There are, of course, alternative options available ranging from transferring your property to your children (with all the attendant risks), putting all your assets into a discretionary trust, taking out a lifetime mortgage to realise some of the capital locked up in your property or even taking out an insurance policy to meet your care costs.

We have a specialist team here at Walker Laird dealing with all of your long-term planning issues.

Call Ronnie McGinlay, Suzie Falconer at our Paisley office on 0141 887 5271 or Ross McGinlay at our Renfrew office on 0141 886 5678 or click here to email us.