Home Protection Plan

The background:

Home protection plans are designed to help the many folk looking for ways of protecting their estate to pass it on to the children and grandchildren.  They don’t want it being wiped out by probate costs, creditors and wasters (usually married to a family member!) Here are some alternatives, one of which can be a TOTAL disaster.

Alternatives to the Home Protection Plan:

Giving the home away to the children is sometimes seen as the solution but can go seriously wrong.

    • Your home may be sold to pay a child’s divorce settlement.
    • The Local Authority may decide it was fraudulent, bankrupt you and reverse the gift via a Court Order.
    • Should you sell your home, perhaps to move, Capital Gains Tax will have to be paid on the increase in value since the gift.  You no longer have “principal private residence relief.” It is no longer your home and for tax purposes it is treated like an investment property. Expensive mistake!

There is also the misconception that if you give the home away at least 6 months before going into care, the local authority cannot touch it. There is a so called “six month rule” in the legislation but this is a rule applicable to a specific circumstance and should not be relied on. In the real world, many local authorities have rules of thumb; some will only look back over one or two years but others may look back over a much longer period. There is no limit.

“Deliberate deprivation” is a relevant concept and makes things more difficult.   We find it hard to credit that some home protection plans are “guaranteed” to avoid care fees. When any plan set up with the deliberate intention of avoiding care fee is likely to be set aside when contested.  But we are fairly cautious with other peoples homes, and don’t feel that getting your fee back, should the scheme go wrong, makes up for losing your home.

Cash strapped local authorities are cracking down on people who they think are trying to avoid paying care fees. They are becoming increasingly sceptical about people saying gifts were made due to the natural love and affection for their children. This guide covers these various points briefly and highlights a simple and uncomplicated approach to sheltering the family home through a recognised planning technique, which has a track record.

Property Trust Wills for couples are initially a cheaper alternative to the Home Protection Plan.  Essentially, they can protect half of the house as long as any creditor does not have rights against both property owners, but if they do, it won’t work! On the death of either partner, probate will be required before the property can be sold – for example, the survivor needs to move to a smaller property. The ideal is a full Home Protection Plan.

Home Protection Plan