Where will I live if the person I care for passes or moves into a care home?

“How does equity release work?”

 

"There are two main types of equity release: lifetime mortgages or home reversion plans," explains James Briggs, a Wills and Probate Solicitor at Rotheras Solicitors LLP. 

 

“With a lifetime mortgage, the homeowner takes out a loan secured against the value of the property, to be repaid only on death or when the homeowner moves out of the property. The compound interest over time means that typically the amount to be repaid on the homeowner’s death is significantly more than the amount borrowed."

 

"With a home reversion, the homeowner sells a share of their property to the provider, subject to a right to continue living in the property rent-free or for a nominal rent. This means the provider receives a share of the proceeds when the property is sold," he further explains.

 

Both products have eligibility criteria, requiring the homeowner to be over 55 for a lifetime mortgage or over 60 for a home reversion plan. 

 

Briggs emphasises the importance of seeking financial advice before proceeding with equity release to ensure it's the best option for us and to identify the right provider.

 

“What happens to my parents’ house after they die?”

 

According to Briggs, the fate of our parent's house after their passing depends on whether they made a will and its contents. The will might specify a particular recipient or divide the assets among named beneficiaries (the people specified in the will), including the house. 

 

"It's worth noting that in the UK, there is currently an inheritance tax relief for parents who leave their homes to their children or grandchildren, allowing up to £175,000 of the property's value (£350,000 for a married couple) to pass tax-free," he adds.

 

Briggs advises that the will should name an ‘executor’ responsible for carrying out the parents' wishes and dealing with debts and inheritance tax. 

 

“If the property is subject to a mortgage or equity release, the provider may require its sale to repay the debt, unless other arrangements can be agreed,” he adds.

 

If there is no will, then ‘intestacy rules’ come into play, determining who should inherit. Generally, if our parent dies without a surviving spouse, their assets are divided equally among their children. If there is a surviving spouse, the distribution of assets can vary depending on the estate's value.

 

“What happens if I inherit a house from a parent?”

 

"When a beneficiary receives the house, the executor usually has paid any due tax and debts connected to the property," says Briggs. 

 

But, situations can happen where there aren't enough funds in the estate to cover the expenses. In cases like this, we may have to take on the responsibility of paying any secured mortgage or equity release.

 

"If the beneficiary (i.e. an adult child) wants to avoid selling the house, they will need to raise the funds themselves, either from their assets or through additional borrowing," he clarifies. 

 

Briggs also highlights that declining the inheritance is an option, particularly if the debts are bigger than the value of the house.

 

Practically speaking, we need to think about insurance, utilities, council tax, and other standard house-related costs before we inherit a home. If we’re considering renting out the property, it’s important to seek out advice from solicitor so we can understand the financials.

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“I gave up my rented flat to move into my Dad’s house to help care for him. He’s about to go into a care home, as I can no longer meet his needs. Do I need to move out of his house? He owns it…”

 

"This question raises a few issues that need to be considered," says Briggs. "The first issue is: will the local authority (local council) expect Dad to sell the house to meet the cost of his care?"

 

"The guidance for local authorities states that they cannot take the house into account to calculate the cost of Dad’s care if it has been occupied by one of his children since before he went into care, and that child is themselves over the age of 60 or disabled.”

 

If the child is under 60, Briggs says that the local authority still has the discretion to disregard the property but would need to be persuaded that it is appropriate for them to do so (e.g., because there is no other housing available to the child).

 

"The second issue is: does the child have the right to stay in the property if Dad can no longer give permission?" This might apply if, for instance, Dad is living with dementia and has reached the point where he can no longer make an informed decision about his property.”

 

The answer to this will depend on whether the property has been disregarded as part of the financial assessment or not, and whether we have the authority to make decisions for Dad (such as a power of attorney).

 

In this case, we must make decisions in Dad's best interests. "It is possible that permission may be needed from the Court of Protection, and you should seek specialist advice about this," he adds.

 

“Mum has offered to sell her house and use proceeds to convert our garage into an annex. Are there any financial implications we need to consider?”
 

Briggs states that there are several implications to consider in this situation.

 

"Firstly, is there any possibility that Mum lacks the capacity to make this kind of decision? If there is any suggestion that this could be the case, you should seek advice about applying to the Court of Protection," he notes.

 

"Even if Mum does have the capacity, this remains a highly significant financial decision. Undertaking substantial improvements to your property is, on the surface, considered a gift (even if the improvements are intended for her benefit). 

 

She should seek advice before proceeding with such a gift and carefully consider how this will impact other family members (e.g., beneficiaries of her will).

 

"We would generally recommend that, instead of treating this as a straightforward gift, a declaration of trust should be drafted to indicate that Mum is acquiring an interest in your property proportionate to the amount she is contributing. This approach offers her greater protection, facilitates fairness to all beneficiaries she wishes to provide for upon her passing, and reduces the potential for future disputes from discontented family members."

 

"Whether this arrangement is deemed a gift or a trust, it's important to note that, for inheritance tax purposes, a portion of your house will be regarded as belonging to Mum upon her death. This is due to the 'gift with reservation of benefit' rules, which prevent individuals from gaining a tax advantage by giving away property or funds while still enjoying benefits from the associated assets."

 

“Dad is moving into a care home, how will they assess his and Mum’s joint finances and is there anything Mum should be doing to ensure her own financial stability?”

 

"Dad's impending move to a care home raises questions about the assessment of his and Mum's joint finances and steps Mum should consider for her financial security," says Briggs. 

 

"Firstly, it's important to note that the local authority typically treats joint assets as shared equally, unless there is substantial evidence to the contrary, like a declaration of trust," explains Briggs. 

 

He adds, "Crucially, the local authority cannot factor in Mum’s assets when determining Dad's care costs. Moreover, they are obligated to disregard the family home's value as long as Mum resides there, regardless of joint or sole ownership."

 

In light of Dad's transition, Briggs advises, "It's wise to create a clear separation between Dad's and Mum's assets wherever feasible. This includes maintaining distinct bank accounts in their individual names. This not only facilitates accurate tracking of Dad's care expenses but also ensures that only his assets contribute to his care." 

 

He emphasises that this separation aids in identifying the point at which Dad qualifies for financial assistance, typically when savings dip below £23,250.

 

Briggs suggests, "If Dad hasn't already taken this step, he should strongly consider establishing a Lasting Power of Attorney. This legal mechanism empowers chosen family members to manage his financial affairs and make crucial decisions about his health and well-being should he become incapacitated. If Dad is unable to do this himself, seeking legal assistance for a Court of Protection application might be necessary to appoint a 'Deputy' responsible for his financial management."

 

"In cases of marriage or civil partnership, Dad can allocate up to half of his pension to Mum, providing her with financial support," notes Briggs. "The situation becomes less straightforward for unmarried couples, warranting specific advice tailored to their circumstances. In instances where Dad is unable to manage his finances, his appointed Attorney or Deputy can oversee his financial matters, ensuring reasonable provision for Mum's needs while considering her financial dependence. This distinction is crucial, as it diverges from using Dad's funds for making gifts, which typically involves certain restrictions."

 

Briggs stresses the importance of a will, stating, "If Dad lacks a will, it's essential to rectify this promptly. And if he's unable to do so, Mum should seek advice about her position, particularly if their marital status differs. Additionally, Mum should review her own will, as a direct gift to Dad might render him ineligible for local authority assistance with care costs—assistance he could otherwise receive. Exploring the establishment of a trust in her will for Dad's benefit might present a more suitable solution."

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“What practical steps can carers take now to avoid homelessness down the line?”

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Carers may face housing challenges, especially if they have to stop working and move in with the person they’re caring for. Briggs suggests discussing potential arrangements with the person being cared for, such as giving us a share of the property or putting a formal license to occupy in place. However, caution should be exercised here, as other family members might object to receiving less.

 

Transparency and communication with all involved parties are key, and we should always seek independent legal advice before finalising any arrangement, particularly if the person being cared for lacks the capacity to make their own financial decisions.

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“Does joint tenancy override a will?”

 

"Joint tenancy and tenancy in common are two types of joint ownership of property in English law," explains Briggs. With a joint tenancy, the surviving joint owner automatically inherits the deceased owner's share by ‘survivorship.’ However, they cannot leave their share to someone else.

 

In contrast, a tenancy in common allows each owner to have their share of the property, allowing them to distribute it in their will. Changing from joint tenancy to tenancy in common can be done by giving written notice to the other owner, and it is often done by professionals while drafting the will.

 

“What does succession mean in council housing?”

 

"Succession in council housing refers to the right to take over a local authority tenancy after the original tenant's death," explains Briggs. The new tenant continues living in the property but becomes responsible for the rent. 

 

Succession is generally a one-time opportunity, and its availability depends on the type of tenancy held by the person who has passed away.

 

Briggs notes that succession might be available to a spouse, cohabiting partner, or other family members living with the tenant for an extended period. Our local authority will provide detailed information and forms if we’re eligible for succession.