Negotiating the red tape of funding care

Posted on: 15 April 2009 by Gareth Hargreaves

For many of us, worrying about paying for care in later life seems a long way off unless we have to get involved on behalf of an elderly relative or spouse.

Where the money comes from however is not the only question that you should consider. A care funding crisis is - looming.  Local authorities are running out of money to pay for care and one of the reasons is the stagnant housing market.

A person living alone has 12 weeks to sell his or her home before it is taken into account in assessing the means-tested contribution to be made to funding a care home.  The local authority has the duty to provide the care, but it can put a charge over the property to recoup, when the property is sold, the fees incurred after that twelve week period.

Where a property is occupied by a spouse or elderly or disabled relative, the share of the property of the person going into residential care is not brought into assessment until that person ceases to occupy, or the property is sold.

But properties aren’t selling.  So the local authorities are not able to recoup the sums that they are paying out for fees.  That is leading to real fears for the quality of the residential and nursing home care which will be provided in future for those who are not entirely and immediately self funding.

Equity release is a means of easing the local authorities’ cash flow problems but is not compulsory and can be expensive.  The introduction of Pre-Owned Asset Tax and its impact where properties are sold to family members has left this market to the commercial sector, such as life offices and banks, with all the expense that entails.

This poses some major political challenges - and some interesting ethical issues.  As a citizen in a democratic society, does one do one’s best to pay for one’s own care to relieve the strain on the public purse, or, working within the regulations, does one minimise one’s own contribution in that regard? 

So what are the options?  Many of my clients have lived through testing times, fought in wars, lived prudent and restrained lives, to build up funds which they can pass on to the next generation, and many of them regard the current regime as inherently unfair.

The confusion between what is free care and what is means-tested does not help.  If one’s care needs are sufficiently great, they will be met by the NHS (regardless of where the care is provided), under the Continuing Care rules.  One client was awarded well over £50,000 reimbursement of fees paid, for care which should have been free.  Such claims can be made posthumously. 

In some parts of the country, assessment for Continuing Care is taking over six months.  And if the individual can’t pay, the local authority picks up the tab in the meanwhile.

If one’s needs are not assessed as entitling one to the Continuing Care, then the local authority will pay (usually only up to a certain level per week) subject to means-testing.  Broadly, one’s income is taken into account, and any capital in excess of £22,500.  There are, however, important disregards, apart from those relating to the family home mentioned above.

Personal effects and chattels (that Damien Hirst sheep, for example) are not taken into account, and nor is foreign property.  Life policies and the life policy element of investment bonds are excluded as well, and that can be quite an important disregard.  Income from investment properties will be brought into account, but not always the underlying capital.  And property which is jointly owned and occupied by the other joint owner may be brought into account but at a very low value.

For married couples (but not for cohabitees) half of the occupational person is also excluded, so that the spouse who is not in care continues to have funds to live on.

Assets of which one has deprived oneself (at any time in the past) may be brought into account if a significant operative purpose of the disposal was to obtain an increase in local authority funding and care, but often disposals have taken place long ago or, for example, for IHT planning and so are not regarded as a deprivation of assets.

Although nil rate band will trusts are no longer always needed for inheritance tax planning, trusts are still very useful for couples (married or otherwise) to protect the estate of the first to die from being used to fund the survivor’s care and lifetime trusts can be even more effective in this regard.

When approaching planning for care fees, people should be aware they have a choice.  Having funds which are outside the means-testing net will give them the option of using the funds to pay for care, or to top up funds provided by the local authority, or to rely wholly on state funding, whichever they think appropriate.  Their individual decision, the “wisdom of the crowd”, will be democracy in action.

By Susan Midha

About The Author

Susan Midha is a partner in the Private Client Department of Adams & Remers Solicitors and a member of Solicitors for the Elderly and can be contacted at susan.midha@adams-remers.co.uk or www.adams-remers.co.uk.

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