Tenants in Common, Downsizing & Care Fees

My post box had the following question:

“My Wife will soon be going into permanent care. At present our home is in “Tenants in Common” format. At some stage in the future I will probably want to sell and move to a smaller property. Can the new property be held under “Tenants in Common”?”

 

The technical bit

Just as a reminder, property in joint names can be held in two formats:

  • Beneficial Joint Tenants  – This is the most common for the matrimonial home and is where both parties own the whole of the property in undivided shares and it passes by survivorship, to the remaining joint owner, on the first death, regardless of the terms of the Will.
  • Tenants in Common – In this each party has a divided share, generally 50:50, and the half share falls to be distributed in accordance with the terms of the Will following death.

The answer

At the time I answered this question, that answer came from Section 6.069 of the CRAG (Charges for Residential Accommodation Guide), which stated:

“A person moves into residential accommodation and has a 50% interest in property which continues to be occupied by his spouse, or civil partner. The LA ignore the value of the resident’s share in property while the spouse lives there but the spouse decides to move to smaller accommodation and so sells the former home. At the time the property is sold, the resident’s 50% share of the proceeds could be taken into account in the charging assessment but, in order to enable the spouse, or civil partner, to purchase the smaller property, the resident makes part of his share of the proceeds from the sale available to the spouse, or civil partner. In these circumstances, in the Department’s view, it would not be reasonable to treat the resident as having deprived himself of capital in order to reduce his residential accommodation charge”.

Consequently, I took the view that the individual would be on safe ground to sell his home, buy another as Tenants in Common, using money from the first sale. Of course, any surplus from his Wife’s 50% share would then fall into the realms of means-testing.

So, for example, if the property sold for £200,000 and the replacement was purchased for £150,000, half of the surplus – £25,000 – would fall into the means-testing pot.  Currently, as that is over £23,250, your Wife would be a self-funder, even if she had no other assets.

Unfortunately, the CRAG has since been withdrawn in favour of the Statutory Guidance under the Care Act 2014, which is much more ambiguous about this and other property matters.  However, I’m keeping my copy of the CRAG to use it as evidence of how the Council should interpret the clear discretions they have in such matters!

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- Care Fees Planning

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About Clive Barwell

Clive Barwell is one of the most experienced and qualified financial planners working in the later life market today, he specialises in advice and guidance for the over 55s. To ask Clive a question, please email him at info@clivebarwell.co.uk. Alternatively, you can follow Clive on Twitter, connect with Clive on LinkedIn or see Clive's profile on Google+.