"We have already written our Wills, leaving everything to one another and then to the children when we've both gone".

- sounds familiar, doesn't it!

But your  children could end up with very little, irrespective of your worth today.  The principle reason is that  one  or  both of you could need residential  care  at  some  stage  in  your  life, whether it’s owing  to  an  accident,  say a car crash  that leaves you  physically  or  mentally incapable, or just through old age and not being able to manage.

Once upon a time this would not have been a problem because we relied upon the NHS or local authority to provide for our care.  After all, we’ve paid our taxes and contributed to the National Insurance fund — but it doesn’t work that way any more!

The Government does provide a safety net—if you have very few assets; but if you have assets over certain limits you will be expected to meet all you own care costs, and these can vary from £300 to £700 per week or more.  It doesn’t take long to spend thousands of pounds in this way.

Nursing Home Fees

When someone goes into residential care he/she is ‘means tested’.  All assets are taken into account, even the value of your home.  You will pay for all your own care costs until you have only £20,000 remaining (varies from district to district).  It is a moral dilemma.  Who can say you should or should not pay for your own care if you can afford it?  Whatever your thoughts on the matter, the government is quite clear - if you have assets above the threshold figure, you will pay for your care.

There is however a way to protect part of the family home from being used to pay for care fees and to ensure your children or other beneficiaries inherit.  The procedure is call Severance of Tenancy, and you need to take action sooner rather than later, because if it is left to the last moment the local authority may consider you to have deprived yourself of the asset to evade payment, and will ‘means test’ as though you still had the asset. 

Severance of Tenancy

What is this?  Why do it?

Most couples own their home as ‘Joint Tenants’.  This means that if one joint owner dies the survivor inherits the whole property.  As neither partner owns an individual share in the property (just 100% between them both) there is nothing to distribute in a Will.  In such circumstances, the only time a Will can deal with the property is when the ‘survivor’ has died and it forms part of the final estate, as the sole owner.  The alternative is to change the way two people own their property to a Joint Tenancy in Common.  The result is that the property is owned 50/50 (but can be 40/60; 30/70 or any other division) and each partner now has a share and interest in the property, new Wills would need to be drafted to distribute each share of the property, not to the spouse, but to the children or other chosen beneficiaries.  If the survivor has to go into care, only those assets belonging to the survivor can be assessed for ‘means testing’.  The share belonging to the deceased partner has been ‘ring fenced’ and will be inherited by that partner’s chosen beneficiaries.

For many couples, a ‘joint tenancy’ creates problems on first death.  Some examples of ‘joint tenants’ problems include:

·  Couples in their 50s or older facing community care costs charged against their house/assets until only £20,000 remains.

·  Relatives over the age of 17 and still living at home could be made accidentally homeless.

·  Couples with no children find on joint death only one partner’s family inherits.

·  Remarried people with children from a previous relationship finding that their children inherit nothing at all.

·  Potential inheritance tax problem where joint assets are worth more than the inheritance tax threshold.

Remarriage of Surviving Spouse

A Joint Tenancy in Common arrangement will also protect your share of the property if the widow(er) remarries.  As the surviving partner can only distribute his/her own assets in a Will, your share of the property is protected and will be inherited by your chosen beneficiaries.  To prevent a partner from being ejected from the family home by beneficiaries, a clause is normally inserted in the Will granting the surviving partner residential rights until death.

Protecting your home from the payment of care fees and preventing all your property from being inherited by a blood line other than yours should be considered by all joint property owners.

Severance of Tenancy in combination with a properly constructed Will can greatly reduce or even eliminate these problems.