Equity release, house titles, care costs – what couples need to know

David Borrowman, Equity Release Solicitor

When couples first buy houses often everything is jointly paid. Many couples therefore have the terms of the title to the property written in such a way that on the death of one party the house is automatically fully owned by the other. This ownership form in Scotland is called “jointly with the survivor” and in England “joint tenancy”. This form of ownership seems logical and sensible and it is still probably the way most couples take title.

However, the older a couple becomes, the more this form of title can perhaps bring with it an unwanted risk. That risk is that one spouse may go into care and the house may be included in an assessment for payment of care costs. The risk arises because of how the means test for care costs works. Houses are not included in an assessment if the spouse of the party going into care remains living in the house.

So far, so good. If the person in care dies first then the house will never be included in a care assessment. The problem arises however if the person not in care dies first.  In that situation the house transfers automatically by the title and is owned by the person in care. The house will then be taken into account in the care means test. This could mean that the house may have to be sold to pay for care – depending on other financial matters of course.

Generally speaking, therefore, it is better for older couples not to hold title to their house title in this way. Couples can change the title to ensure the house does not automatically pass to the survivor on death of one party. Rather the property passes by their will to whomsoever the person chooses. At the same time as changing the title the couple make wills in favour of each other.

Once the title is changed, as soon as one of the couple goes into care, the other changes their will to leave their share of the property to another party – usually children. Then if the party not in care dies first only half the house can be included in the care assessment. If the party in care dies first  the house is never in the care assessment.

Our average equity release clients are in their early seventies and healthy. And, while we are dealing with the equity release scheme – and the titles to their property – it is therefore, a perfect time for couples to take stock and think about their house title. Relatively cheap and simple steps to change the title and wills taken at the point the equity release is taken may go a long way to saving a very valuable asset for the family.

Note: The law may be different in England and Wales and therefore clients should seek specific advice from a solicitor before taking any action.

This is a guest post from David Borrowman, who is a Senior Partner of Caesar and Howie, a law firm in Scotland which provides independent expert legal advice to those who wish to release equity from their home. Caesar and Howie is a member of the Equity Release Solicitors’ Alliance (ERSA).