Home Protection Scheme (also known as an Asset Protection Trust) is a product that is designed to protect your home and make sure it is inherited quickly smoothly and cost effectively by the right people and thus avoiding the expense and stress that can be associated with the transfer of a home.
Did you know that anecdotal evidence in the past has suggested that between 40,000 and 60,0000 homes were sold each year to pay for Care Home fees?
Here are some frequently asked questions about the Home Protection Scheme;
Parents who, throughout their hard working lives, have built up nest eggs intended for their children to inherit have seen this potential inheritance decimated over what can be a relatively short period once in care.
With proper planning, this potential situation may not have to happen. There are ways to help protect the family home for the next generation.
Did you know that when you die your executors will have to go through the Probate procedure in order for your house to be sold or transferred to the beneficiaries? This can be a time consuming and expensive burden to the family whilst grant of probate is applied for and accepted.
A typical property worth £160,000 can cost in the region of £3,000 in probate fees. With proper planning this situation can be avoided; thereby protecting the family home from these procedures and fees*.
* in many cases The Home Protection plan will eliminate completely the need for probate as the home will not form part of the probate administration. However other aspects of your estate may still necessitate the need for probate on part of your estate.
Did you know that if you did not have a Lasting Power of Attorney and lost your mental capacity, you or your family would not be able to deal with the administration of your property? For example selling your property? With proper planning this situation can be avoided.
There are ways to allow your chosen family members to deal with the administrative burden of your property.
Did you know that waiting for your will to hopefully transfer your home to the right beneficiaries can typically take anything up to 3 months through the probate procedure?
This situation can be avoided with the intended beneficiaries receiving their inheritance immediately on death and not subject to the expensive time consuming probate procedure.
Did you know that parents are sometimes concerned that their home may be inherited by their children at a time when it could become part of the proceeds in regard to a divorce settlement?
With proper planning this situation can be avoided where the home cannot be sold to fund or form any potential divorce settlement.
Did you know that assets in trust cannot be contested?
Did you know, on death, the value of the home left in trust would not be added to your children’s assets/estate and would therefore not attract inheritance tax?
Below is some general information about the Home Protection Scheme specifically about the benefits to you and your family.
- It’s designed for homeowners
- For single people or couples
- If both individuals in a marriage are still alive when HPS is entered into then this makes the position even stronger as the home would be disregarded if one of the couple went into care
- Usually those from the mid 60s upwards
- Those in reasonable health
- Those for whom entry into care is not being contemplated but only a distant possibility
- Those whose property does not exceed the nil-rate bands; currently £325,000 for single people and £650,000 for married couples
- This basically involves the transfer of a client’s home into a trust
- The person creating the trust may continue to live in the property for the rest of their life and they themselves can be a trustee
- Despite the trust now owning the property, the client still retains all benefits and flexibility appertaining to home ownership and can sell the property at any time or move to a smaller property with the trust still in place
- The home should no longer count as a capital resource
- On death of the former owner the property passes to the chosen beneficiaries
- The Trustees ensure your home will pass to those people you wish to benefit at a time selected by you
- A surviving spouse may remarry and predecease the new spouse but it stops the new spouse leaving all their new assets to their children and excluding the children from the first marriage
- You are not at the mercy of unscrupulous 3rd parties or even manipulative children who can assert pressure on you to obtain money
- Stops the situation where children could become part of a disastrous marriage where their partner could have a claim on their inheritance
- Should children become bankrupt then they cannot claim against assets of the trust
- If there is the possibility of you going into care then again by setting up the Home Protection Scheme for the right reasons this would have a major impact on why a local authority would find it very difficult to seize the property to pay for the care home fees.
- The cost of setting up this Trust is relatively small compared with the potential savings the trust can achieve
- Individual circumstances vary a great deal and a thorough review of the clients’ affairs must be carried out to ascertain the need for the Home Protection Scheme.
- Clients’ plans should be discussed with their immediate family of whom this will have the greatest impact; i.e. the beneficiaries of the estate
- If, having moved into care, it is found that you have deliberately deprived yourself of resources (including your home) you can be considered as still having those resources and the local authority will calculate your entitlement accordingly. This would include the establishment of the Home Protection Scheme. The timing of the disposal of the asset has to be taken into account. While there are no hard and fast rules, the longer the period between the transfer of the property to the trust and the need for care, the lower the likelihood that ‘deliberate deprivation’ can be proved.
You can simply give away your home to members of your family without the use of a Trust. However, we strongly recommend that you don’t do this for the following reasons:
- Lose Control; once you give your home away it is no longer yours and you lose all control over it
- Divorce; if your children were to divorce the home could be under threat as part of a divorce settlement
- Bankruptcy; if a child went bankrupt the home would be under threat
- The new owners of your property could pressure you into entering residential care sooner than you would have wanted to
- Finance; the children could raise finance on the property. It is now the children’s house to sell!
- Obtain some local authority grants for repairs and maintenance so it’s best to take advantage of these schemes before setting up the HPS
- Obtain equity release schemes. So it’s best to take advantage of these schemes before setting up the HPS
- Remortgage or take any further secured lending on the property. So it’s best to take advantage of this funding before setting up the HPS
Which? Magazine published an article about Care Home Fees. Please click below for some information from the article that we believe you may find useful.