Joint tenants and care home fees

Debbie9009

Hi,

I’m hoping someone will be able to confirm if I am correct in what I am thinking.

My parents own their home mortgage free as tenants in common and have wills leaving each half to myself and sibling, with the right for the other to live there until they pass away.  They are doing this to avoid all of the home being used for care home fees if needed.  I’m not happy with this as I think if care is needed that’s what their money and assets should be used for, so I am trying to point out the pitfalls of this idea, all thoughts are based on one parent passing away and the house then being owned 1/2 by surviving parent and 1/4 each for myself and sibling.  

Both sibling and myself are married, and while neither of us are intending to divorce, if something happened at some point in the future the part of the house we owned would be an asset and would be taken into account when sorting a financial settlement ? I wouldn’t have the money to cover this and neither would my sibling.

Capital gains tax would be due on the part we own if the house was sold, would this also be the case if the surviving parent wanted to sell ? And as we both already own our own houses, I’m assuming the extra 3% stamp duty would also apply, as myself and sibling wouldn’t be replacing our main residence.  Would I also be right in thinking this would apply to the whole purchase, not just the bit myself and sibling would own.

My parents are also under the impression that because they have some money, if care was needed they could chose a home and when the money runs out the council would have to keep them in that home no matter the cost because they would be settled there, I’m fairly sure this isn’t the case, and they could and probably would move them.

My main concern is that I do have a condition that could get worse and result in me being unable to work, I’m hoping that this doesn’t happen.  However if it does I think that the value of the part of the house I would own, would be taken into account when assessing if I would qualify for certain benefits would that be correct ? 

I’m really concerned that doing this could leave them in a precarious position, and I would really prefer that they didn’t do that, they worked hard for their money, and to be honest I would rather if they needed care they went into the best care home possible, so I’m very much against this idea.

Thanks in advance for any answers 

Deb

[Deleted User]

Debbie9009 said:

Hi,

I’m hoping someone will be able to confirm if I am correct in what I am thinking.

My parents own their home mortgage free as tenants in common and have wills leaving each half to myself and sibling, with the right for the other to live there until they pass away.  They are doing this to avoid all of the home being used for care home fees if needed.  I’m not happy with this as I think if care is needed that’s what their money and assets should be used for, so I am trying to point out the pitfalls of this idea, all thoughts are based on one parent passing away and the house then being owned 1/2 by surviving parent and 1/4 each for myself and sibling.  

Both sibling and myself are married, and while neither of us are intending to divorce, if something happened at some point in the future the part of the house we owned would be an asset and would be taken into account when sorting a financial settlement ? I wouldn’t have the money to cover this and neither would my sibling.

Capital gains tax would be due on the part we own if the house was sold, would this also be the case if the surviving parent wanted to sell ? And as we both already own our own houses, I’m assuming the extra 3% stamp duty would also apply, as myself and sibling wouldn’t be replacing our main residence.  Would I also be right in thinking this would apply to the whole purchase, not just the bit myself and sibling would own.

My parents are also under the impression that because they have some money, if care was needed they could chose a home and when the money runs out the council would have to keep them in that home no matter the cost because they would be settled there, I’m fairly sure this isn’t the case, and they could and probably would move them.

My main concern is that I do have a condition that could get worse and result in me being unable to work, I’m hoping that this doesn’t happen.  However if it does I think that the value of the part of the house I would own, would be taken into account when assessing if I would qualify for certain benefits would that be correct ? 

I’m really concerned that doing this could leave them in a precarious position, and I would really prefer that they didn’t do that, they worked hard for their money, and to be honest I would rather if they needed care they went into the best care home possible, so I’m very much against this idea.

Thanks in advance for any answers 

Deb

There's nothing inherently wrong with what your parents are proposing.  In the case that one parent required to move into a care home permanently then the house would not be included in the means test calculations whilst the other parent remained living in the house.  In the case one of your parents has passed and the other then requires care the means testing is limited to the half the house the surviving parent still owns.

Your parents are wrong about the council picking up the tab no matter the cost.  There is a limit to how much funding will be provided so either someone will need to make up the shortfall or your parent(s) will need to move to a less expensive facility if the funding received won't be enough.

Age UK is a good resource you could direct your parents towards:

https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/do-i-have-to-sell-my-home-to-pay-for-care/

The higher rate of SDLT won't be an issue for you or your sibling if you are replacing your main residence as in selling your current home to buy a new home.  CGT might be an issue in the future depending on how your parents set up their wills.  For example, if might be sensible for the wills to have a clause about allowing the surviving parent to see out the rest of their days in the property.  It is something your parents should take professional advice on and not attempt to DIY.

Moonraker71

Hi Deb,

I'm in the exact same situation as you, except my father has already passed away. About a year before he died, he changed the ownership on their mortgage-free house from joint tenants to tenants in common, as he wanted to ring-fence at least half of the value of the house in the event of one of them needing to pay for long-term care. He felt really strongly about it, bless him. It was always really important to him that he could pass something on to his two children. 

As the post above says, the way things currently stand mean that a) if one of your parents went into care and was self-funding, their house will not be taken into account when means testing once their funds run out, and b) if the parent in care died, and then the surviving spouse also needed to go into care at a later date, only 50% value of the house could be taken into account. 

This may already be part of the way things are set up, but if not, you need to ask about a Will Trust. I think this will resolve most of the things you're concerned about. My brother and I technically 'own' a quarter share each of the house - indeed our names are now on the deeds at the Land Registry - but the will was set up so that my dad's half share of the house was transferred into a Will Trust upon his death. This means that we are Trustees only, and we do not hold a 'beneficial interest' in the property until my mum is actually dead. 

My mum continues to live in the house, owns half, and has a 'lifetime interest' in my dad's half, meaning she has the right to live there for the rest of her life.

Because we are only Trustees – and do not yet hold a 'beneficial interest' – we wouldn't be liable for higher rate stamp duty or capital gains tax in the scenarios you've outlined. I asked my solicitor these same questions! Of course, this changes once my mother has died, because then it would be viewed as a proper financial asset - but at that point we'd more than likely sell the property anyway. 

It sounds as if your parents may have set this up with the same motivations as mine. I also had the same feeling about my folks leaving themselves in a precarious position, but at the end of the day if my mum ever does need to go into care, and the house needs to be sold, my brother and I wouldn't think twice about using 'our' share of the equity to ensure she got the care she needed. As far as we're concerned the house is still 100% my mum's until after she dies, but at least my dad died knowing that he'd been able to ring-fence something of what he'd worked for all his life, to pass on to his children, which is what he wanted. 

Debbie9009

Thank you for the answers, I didn’t know about being able to leave half of the house in a trust, that may well sort out all the concerns I have.  My parents are going to a solicitor to have their will drawn up properly, so I’ll mention it to them so they can ask the solicitor how to go about this.

If I’m honest, I would still prefer that they keep all the house themselves in case of care home fees, but its their house, and I don’t feel I have the right to tell them what to do.

thanks

Deb