Ensuring Financial Security: The Benefits of a Life Interest Trust Will After the Care Costs Cap Cancellation

The recent move by the new Labour Government to cancel the planned creation of a care costs cap to £100,000 has significant implications. Particularly for individuals who may require long-term care in the future. It’s now more crucial than ever to consider ways to protect your assets from being significantly depleted by care home fees. 

One highly effective strategy to safeguard your wealth and ensure that your loved ones are provided for is through the use of a Life Interest Trust will.

Understanding Life Interest Trust Wills

A Life Interest Trust is a legal arrangement that allows you to protect your property and other assets for the benefit of your beneficiaries. This is all while still providing for the needs of your spouse or another loved one during their lifetime. The trust is typically set up as part of your Will, ensuring that, upon your death, the trust comes into effect. 

Under a Life Interest Trust Will, the appointed individual (often a spouse) is granted the right to benefit from the assets held in the trust during their lifetime. This could include receiving income generated by the trust or living in a property owned by the trust. However, they do not have the right to sell or dispose of the trust assets. Upon their death, the assets then pass to the ultimate beneficiaries, such as your children or other relatives.

The Impact of the Government’s Care Costs Cap on Life Interest Trust Wills

The recent decision by the Labour Government to scrap the planned creation of the £100,000 care costs cap has far-reaching implications for individuals and families across the UK. This move means potentially exposing a significant portion of your estate to care costs, particularly if long-term care is required.

Under the previous Government’s plan, the £100,000 cap was designed to limit the amount that individuals would have to pay out of their own pockets towards care home fees. This cap would have provided a safety net, ensuring that a considerable portion of an individual’s assets could be preserved for their family and future generations. However, with this protection now removed, there is no such guarantee.

Now the way you pay for your care fees will remain the same. If your capital is above £23,250 when financially assessed by your local authority when you are deemed to need care, you will pay 100% of your care fees. Once your capital drops below that, the local authority pays for some of your care and you pay for the rest. Once your capital drops below £14,250, the local authority pays for all your care (but if you are in a care home which is not run by the local authority, the care home may ask you family to pay a top-up fee to cover the rest of your fees, because local authority rates do not cover the whole cost of private care fees).

How Will the Cancellation of the Care Costs Cap Affect Assets?

The cancellation of the care costs cap means that individuals with even modest assets could see a substantial portion of their wealth consumed by care costs. The means test for care home funding considers assets, including savings and property, when determining how much an individual must contribute towards their care. Without the cap, more people will have to sell their homes or deplete their savings to cover these costs, leaving less to pass on to their loved ones.

Therefore, without the care costs cap, individuals who require long-term care may end up paying hundreds of thousands of pounds over the course of several years. This can be particularly devastating for those who have spent their lives building up their savings or purchasing a home, only to see those assets rapidly diminish due to care costs. Families may find that the inheritance they had hoped to leave for their children or grandchildren is significantly reduced or even entirely consumed by the need to pay for care.

Additionally, the unpredictability of care needs adds further stress to financial planning. It's difficult to predict how long someone might need care or how much it will ultimately cost. The cancellation of the care costs cap exacerbates this uncertainty, leaving families vulnerable to the possibility of their assets being eroded far beyond what they might have anticipated.

What Can I Do to Protect Assets without the Care Costs Cap?

This is where the importance of strategic estate planning comes into play. With the Government’s decision placing more financial responsibility on individuals and their families, it’s essential to explore all available options to protect your assets. A Life Interest Trust Will can be an effective way to shield your estate from these risks, ensuring that your wealth is preserved and passed on according to your wishes, rather than being depleted by care home fees.

By taking proactive steps now, you can safeguard your financial legacy and ensure that your loved ones are not left struggling to cover care costs. Or that they are not faced the difficult decision of selling the family home.

The Government’s Cancellation of the Care Costs Cap and Life Interest Trust Wills

Shielding Property from Care Home Fees

One of the primary benefits of a Life Interest Trust Will is that it can help protect the family home from being sold to pay for care costs. If the property is held within a trust, it may be excluded from the means test that determines how much you are required to contribute to your care costs. This means that the property can eventually be passed on to your beneficiaries, preserving your family’s wealth.

Ensuring Financial Support for Your Spouse

A Life Interest Trust ensures that your spouse or partner can continue to live in the family home or receive income from your assets for the remainder of their life, even if they also require care. This arrangement provides security for your loved ones, ensuring they are not left vulnerable if they outlive you.

Maintaining Control Over Your Estate

With a Life Interest Trust, you can specify exactly how your assets are to be distributed after the death of the life tenant (the person benefiting from the trust during their lifetime). This ensures that your estate is ultimately passed on to your chosen beneficiaries, according to your wishes.

Flexibility and Peace of Mind with a Life Interest Trust Will

Life Interest Trusts offer a flexible solution that can be tailored to suit your family’s specific needs. By setting up a trust, you gain peace of mind knowing that your assets are protected, and your loved ones will be provided for, regardless of what the future holds.

In an environment where care costs are a growing concern, especially with the Government’s decision to cancel the care costs cap, planning ahead is more important than ever. A Life Interest Trust provides a powerful tool to protect your assets, ensuring that your hard-earned wealth is preserved for your loved ones rather than being consumed by care home fees. 

Discuss Your Life Interest Trust Will with a Professional

If you’re concerned about the impact of care costs on your estate, it’s advisable to seek professional legal advice to explore whether a Life Interest Trust Will could be the right solution for you. By taking action now, you can safeguard your family’s financial future and ensure that your legacy is preserved for generations to come. 

If you would like more information or to discuss your individual circumstances, please contact our Wills team, and we would be happy to assist you.

To speak to a private client solicitor about the importance of Wills and setting up an LPA, please contact our Wills and Probate team on 0113 320 5000, or email @email