A couple sought advice regarding concerns about care home fees. The couple already had Wills leaving everything they owned to each other, with the assets then passing on to their children when the second person dies. Such Wills are fine in theory, but can potentially cause issues in the future, and result in the Estate not being distributed in the way that they had hoped.
Care home fees: If one of the couple were to die with the Wills as drafted previously, then all the combined assets could become subject to care home fees – e.g. if the survivor was to go into a care home the following scenario could come about:
The combined assets of the couple amount to £600,000. If the first to die left everything to the other, that total could be subject to care home fees which could easily amount to £50,000 per year. In Wales, the Local Authority will step in and fund care home fees once a person’s finances fall to £50,000, in England there is a range of threshold of £23,500 to £14,250. This may mean that the children of the couple inherit a share of just £50,000 (in Wales) or £14,250 (in England).
Sideways disinheritance/remarriage: while discussing the issues, the point of remarriage was raised. If the survivor of the couple died, having not changed their Will, there is a potential risk should he or she remarry or enter a new relationship with the following scenario:
If the survivor remarries, their Will is automatically revoked, with the rules of intestacy which will favour their new spouse. Even if the survivor and the new spouse make Wills, in similar terms as the couple’s current Wills i.e. leaving everything to his new spouse, following which the assets should be left to this new couple’s children. Should the survivor die before the new spouse, the latter could decide to leave all the assets to their own children – disinheriting the original couple’s children who will get nothing.
Our Wills & Probate experts agreed to draft Wills containing ‘Life Interest Trusts’. This means that each of the couple leaves their share of assets for their spouse for life, with their children being entitled to the assets of the first to die upon the second spouse’s death. This means as follows:
Care home fees: rather than the Local Authority being able to claim up to £550,000 (in Wales) and £585,750 (in England) in assets, should Life Interest Trusts be used, the share of the first of the couple to die (£300,000) is ringfenced. This means that, in Wales, the children would share £350,000 rather than £50,000 and, in England, £314,250 rather than £14,250.
Sideways disinheritance/remarriage: as the assets of the first of the couple to die is ringfenced as a life interest, their share is left in accordance with their Will, so will pass to their children, regardless of whether the surviving spouse remarries or changes their own Will.
If you would like assistance with Wills, Trust or Asset Protection, please get in touch with a member of our Wills & Probate team via our contact form or over the phone on 029 2082 9100 for a free initial chat to see how we can help you.
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