Changing the way you own your house

It doesn't occur to most people that one day they may need to sell the home they have spent many years paying for in order to release funds that have to be paid for residential care.

In fact, like most people you probably don't know the structure of your home ownership and how this can affect the assessment a local authority will do when they are looking to use your funds to pay for care.

Two kinds of home ownership

To help with this it's worth understanding just how home ownership works in England and Wales when two or more of you purchase a property. There are two common structures: Beneficial Joint Tenancy and Tenancy in Common.

Beneficial Joint Tenancy

Owning your property as beneficial joint tenants means that the property belongs to you and the other owners, your partner or spouse in most cases, jointly. This means you all need to act together as though you were the sole owner.

In other words, you do not own specific shares in the property, and you cannot give away a share of the property in a Will. If you die your interest in the property passes automatically to the other owner or owners

A beneficial joint tenancy ends when either, the whole property is transferred to one owner, the tenancy is converted into a tenancy in common, the property is sold, or one owner outlives all the others.

Tenancy in Common

Owning property as tenants in common means the property belongs to you jointly with other parties but in this case, you own a specific share of its value. You can give away, sell or mortgage your share and if you die your share passes to the beneficiary in your Will.

We often see this type of arrangement in second marriages where a couple purchase a new home together but one of the partners has more equity to put into the purchase.

A tenancy in common ends when you sell the property, or you all convert to a beneficial joint tenancy or one owner acquires all the shares in the property.

Why does this make a difference to care home fees?

There are certain circumstances when you would want to consider what is known as Severance of a Joint Tenancy to become Tenants in Common, these are:

A breakdown in the relationship of the parties

In the case of a divorce or separation it is unlikely that either party would wish their former partner to automatically take their share of the property if they were to die.

In these circumstances it is usual to sever the joint tenancy and become tenants in common until such time as the property is sold or transferred fully to one party.

To prevent children from a former relationship being disinherited

In some circumstances it may be appropriate to sever a joint tenancy in a case where one party has children from a former relationship and they're worried that if they die first their spouse will disinherit those children if they remarry later on.

To protect against care home costs.

The thought of having to pay for residential care and possibly losing the family home as a result is a real worry for many elderly people and their families.

Anyone with assets of more than £23,250 will be assessed as being able to meet their care costs and in most circumstances the value of any property owned will be included in this sum.

However, with some forward planning there are circumstances where the home can be excluded from this calculation.

Firstly, the house will automatically be ignored if the remaining partner or surviving spouse is still living there. This rule also extends to other relatives over the age of 60 also living in the property such as a son or daughter for example who has moved in as a carer.

Take your home out of the care equation

Secondly and more importantly you can take the home out of the care equation completely by altering the way in which it is owned.

If a property is owned as joint tenants and the tenancy is then severed to tenants in common this gives both parties the freedom to leave their share of the home to whoever they wish.

In these circumstances where a property is owned as tenants in common the property is effectively out of the reach of local authorities, even after the death of the first partner.

A simple example would be that of a husband who dies and leaves his half share of the home directly to the children or to a trust. The value of his wife's share of the property would then be ignored if she goes into care at a later date because her half of the home is deemed worthless as it cannot be sold on the open market.

Make plans well in advance

Local authorities are aware that people can and do sever tenancy's in order to avoid care home costs and in some circumstances will still consider the property to be part of their assets, hence it is important to plan in advance and make these changes well before the need for residential care arises.

Take some advice

Whatever the circumstances you find yourself in and especially when thinking about the future it is always worth asking for expert advice from an experienced practitioner.

Understanding how your home is owned and making the correct decisions that will protect it and your children's inheritance can be complicated. However, with knowledgeable advice from experts such as Savigny Will Writers you will have all the information you need to make well informed decisions.

We can then manage all the paperwork for you to ensure a severance of tenancy is completed efficiently, helping to put your mind at rest.

At Savigny we believe that everyone should be treated with respect, kindness and receive a caring personal service. We are happy to spend time with you, understanding your needs and helping you to correctly complete paperwork so you can be confident it's done correctly.

For more information or if you have any questions about Severance of Tenancy, Wills or Trusts please contact Savigny Will Writers today.

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