Paying For Long Term Care

Paying for long-term care is a major headache for many of us. The rules can be confusing and it’s often unclear what we can do to protect our assets from being swallowed up.

If you need help at home or long-term residential care your local authority’s social services department is legally obliged to carry out an assessment – of both your personal needs and financial circumstances.

You’re not obliged to disclose any information about your finances if you do not want to, or if your savings exceed the £22,250 threshold – but failure to do so means you will have to meet the full cost of any services provided.

Your local authority will need to see proof of your income such as pension receipts and investments. It will automatically assume you are receiving all relevant benefits so it’s wise to check up on your entitlements.

But regardless of how much you can contribute 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 wish.

The Capital Threshold  

If your savings top the £22,250 threshold you will have to meet the full cost of your residential care or any care services provided for you in your own home. This is known as self-funding.

If your capital is less than the threshold but more than £13,500 you will be asked to pay a contribution towards the cost of your care. Make sure you check how your local authority made the calculation, though, so you don‘t end up paying more than you should.

Any capital less than £13,500 will be ignored when any calculations are made. Only your income will be used in the means test.

Your local authority can’t assess the joint resources of a couple but it can 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 the law and you may need to seek advice.

Assessing The Value Of Your Home

If you own your home with your spouse or civil partner and you need to live in a care home while they stay put, the value of your interest in your family home will be disregarded in a means test. Its value may also be disregarded if certain specified relatives share your home with you.

Likewise, if you stay at home and receive care or support services the value of your home is ignored in a means test. 

In cases where your home is treated as capital this won’t take effect until 12 weeks after you move into a care home permanently. If your stay is temporary initially, the 12 week rule doesn’t apply until your stay becomes permanent.  If you sell your home within the 12-week period the proceeds from the sale are counted as part of your capital.

A Way Forward

One way of protecting a significant amount of your assets from the means test is to set up a trust in your will so that when you die your children, other relatives or beneficiaries can benefit.

Sometimes your home can be held in a trust allowing you to live in it during your lifetime and leave it to the beneficiaries of your choice. You can also pass the responsibility of maintaining it to your trustees, secure in the knowledge that your children will inherit even if you or your spouse changes your wills at a later date.

It is possible for you to move home once a trust has been established but the purpose and timing of this step is crucial. For example, the ‘deprivation of capital/benefit’ rules might apply to any gift or transfer of your home.  But be aware of the possible effects.

If you deliberately deprive yourself of a capital asset with the object of decreasing the amount you would pay in care fees or enhancing your entitlement to welfare benefits, you may be treated as still owning the capital asset and assessed financially on that basis.

Bear in mind, too, that for a number of reasons it may not be advisable to transfer your home to your children. Consider what happens if they die before you, become bankrupt, divorce, lose capacity or even fall out between themselves – or with you.

Any of these situations could have a detrimental effect on your continued occupation of your home. Tax is an important consideration in these circumstances and shouldn’t be ignored.

The Government is currently exploring a raft of ideas on long term care for the elderly, among them a new insurance-based system to fund care.  A Green Paper on this is expected in 2009.   

By Harvey Barrett, partner at Furley Page Solicitors.   

For further information about Furley Page Solicitors visit www.furleypage.co.uk

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