A Brief Summary of Paying for Care

27 May 2008

Paying for long term care fees is a major worry for a number of people. The rules can be confusing and it is often unclear as to what can be done do to protect one?s assets from being dissipated. 

If you require help at home or need long term residential care your local authority (LA) through its Social Services department is legally obliged to carry out both an assessment of your needs and a financial assessment in order to determine your ability to pay for services it may arrange.   You do not have to disclose any information about your finances if you do not wish to do so or if your savings exceed the threshold of £22,250 mentioned below, but if you do not wish to make a disclosure you will then have to meet the full cost of any services provided.  The local authority will need to see proof of your income (eg pension receipts) and capital (eg investments). They will assume you are claiming and receiving all the benefits to which you are entitled and it is important therefore that you make sure you are claiming everything that is relevant to you and your circumstances. We are able to advise and assist you in this regard if you so wish.

Regardless of how much you may have to pay towards your care fees, you MUST be left with a Personal Expenses Allowance (PEA) of £21.15 a week from your income to spend as you choose.

The Capital Threshold

If your capital (savings) exceeds £22,250 you will be assessed as being able to meet the full cost of your residential care or any care services provided to you in your own home.  This is known as “self funding”.

If your capital is less than this amount but more than £13,500 you will be required to pay a contribution towards the cost of your care from your capital and income.  The way in which this calculation is made by the local authority should always be carefully checked to ensure you are not being obliged to contribute more from your resources to your care needs than you should be paying.  

If your capital is less than £13,500 it will be ignored completely when calculating how much you need to pay for your care. Only your income will then be used in the means test calculation.

The local authority is not able to assess the joint resources of a couple – it is only able to assess your own capital and income. However it will take into account your share of any joint assets and there are instances where a contribution from a spouse or civil partner is assumed to be made.   This is a complex area of law upon which we can advise if necessary.

Certain rules apply in relation to the way in which the value of your home is treated.  These are summarised below.

If you own your own home with your spouse or civil partner and you need to live permanently in a care home and your spouse or civil partner continues to reside in your home then the value of your interest in your home will be disregarded for the purposes of any means test.  Its value may also be disregarded if certain specified relatives share occupation of your home with you.  If you continue to live in your own home and receive care or support services then the value of your home is completely ignored for the purposes of any means test.  Here again the rules relating to home ownership in these circumstances are complex.  We can advise you on all aspects of the local authority means test and guide you through the regulation minefield. 

If your home is treated as capital for means test purposes it will only be so 12 weeks after you move into a care home on a permanent basis.  If your stay is only temporary to begin with the 12 week disregard does not start to run until it is decided that your stay will be permanent. However if you sell your home within the 12 week period, the disregard benefit ceases and the sale proceeds are then counted as part of your capital.

A Possible Solution

It may be possible to protect your assets from the local authority means test by setting up a trust in your Will. This could protect a significant amount of your hard earned savings which might then be left on your death for the benefit of e.g. your children, other relatives or charities.

Where a Home is Held in Trust

Sometimes, for reasons otherwise than those connected with claiming benefits, your home may be held in Trust.  What impact might that have on your entitlement to local authority support towards care fees?

Often there is good reason to put your home into a trust so that you can continue to live in it during your lifetime and then leave it to beneficiaries of your choice on your death. It would allow you to pass the responsibility of maintaining your home onto your trustees and will enable you to determine with certainty that your children will benefit from your home even if you (or your spouse) should change your Wills later.

It would still be possible for you to move home once the trust had been established.  However, the purpose and timing of taking this step is important.  For example the ‘deprivation of capital/benefit’ rules might apply to any gift or transfer of your home.  The rules here are equally complex and you should always seek advice about their possible effect.  If you deliberately deprive yourself of a capital asset with the main purpose of decreasing the amount you would have to pay for care fees or enhancing your entitlement to welfare benefits you may be treated as still owning the capital asset and financially assessed on that basis.  Bear in mind also it may not be advisable to transfer your home to your children for a number of reasons. Considerations here include what happens if your child or children:

• should die before you
• should become bankrupt
• should divorce
• should themselves lose capacity
• should fall out between themselves (or, indeed, with you).

Any of these events could have a detrimental effect on your continued occupation of your home.

Tax is an important consideration in these circumstances and should not be ignored.  Here again, we can provide advice and assistance to guide you though the necessary procedures. 

This article can only convey a very brief explanation of the rules surrounding paying for care.  The government may introduce a new insurance based system to fund care for elderly persons and it is presently exploring this and a number of other ideas.  A six month consultation launched in May 2008 with a view to publishing a Green Paper in 2009.  Whatever the future holds paying for care will continue to be a concern for many of us and especially as we grow older. 

We have a dedicated team of experts in social welfare matters to help guide you at all stages of the care process.  Come and talk to us, better still, invite us to see you in your own home at a time which is convenient for you. 

For more information speak to Harvey Barrett, Sarah Bogard or Nicola Rostron.
 

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