If you go into care
If you go into care, and you do not have a spouse or dependent relative living in your home, you will need to decide whether to sell it or to rent it. If you have gone into care and have lost mental capacity, your Trustees will need to make this decision for you. If the property is sold, the proceeds will continue to be protected within the Trust and can be invested and you will normally receive the interest or income earned on the invested capital.
Care Home Fees
A frequent question is why should the elderly have to sell their homes to pay for care? With many people wondering whether it is possible to avoid care home fees? The article below covers issues around care home fees.
Proposed Changes in 2016 (now deferred to 2020 at the earliest)
The Chancellor announced revised proposals for how care fees will be funded after April 2016 in his 2013 Budget speech. The headline announcement was that individuals would only have to fund the first £72,000 of social care and the limit of capital above which an individual would have to fund all care fees would be increased from the current £23,250 to £118,000.
On the face of it this is all good news but digging deeper nothing will change very much – although the final small print has not been issued. The things to note are that the £72,000 cap only applies to social care – it does not include “hotel” costs such as accommodation and food, which can make up a large proportion of overall fees. Raising the capital limit may not have much impact (apart from local authorities having to pay social care costs over £75,000).
I have done some “sums” for a person with an income of £250pm and capital of £250,000 (a house/flat in the South East, say) who goes into a care home and pays £650pw but the local authority will only fund up to a maximum of £540pw. Without going into the detailed calculations, the £72,000 cap will be reached after 5 years and it would take 25 years for the capital to be reduced to a level where the local authority will contribute towards other costs. The average stay in a care home is under 5 years. So the individual would pay the same in care fees as he would do under the current arrangements, i.e. all of his care fees, and the house would need to be sold to pay for it (unless it is rented out or other measures taken to protect it).
Long Term Care Rules (2015/16)
The rules governing long-term care costs are complicated and are interpreted in different ways by different Local Authorities. This section gives the general rules. Before going into care you (or your family) should seek specialist advice (which I can provide).
If you have to go into permanent care in the community you may have to pay for some or all of the residential costs. The Local Authority (“LA”) will carry out an assessment of your income and means. If your income is not sufficient to cover the residential costs (after allowing for a personal expense allowance of £25.50 per week) it will then assess your capital assets. If it assesses your capital worth to be more than £23,250 you will have to pay all the residential costs. If it assesses your capital assets to be worth less than £14,250 you will not have to pay any of the residential costs. If it assesses your capital assets to be worth between £14,250 and £23,250, it will assess you as having income of £1 per week for each £250 of assets between £14,250 and £23,250 plus your actual income (less £25.50 per week) and will deduct this total from the care fees and pay the difference.
A partner’s (share of) capital is not taken into consideration.
In assessing your capital worth, the LA will include anything you own that has a value, including, after 12 weeks of care, your (or your share of the) house (less 10% for notional costs of selling or the actual costs of selling, if the property is sold) and your share of any money in joint accounts (but not capital investment bonds).
However, if your partner (spouse, civil partner, “common law” spouse or same sex partner) is still occupying the house, the value of the house will be disregarded. Also, if a relative aged 60 or over, a relative who is incapacitated, an ex-partner who is a lone parent or children under the age of 16 are still occupying the house, the value of the house will also be disregarded.
The LA cannot force you to sell the house and cannot itself sell the house in order to get its fees paid. However, the inevitable result may well be the sale of the house if any other assets have a small value. The LA also has discretion to levy a charge on the house if both you and the LA agree (in which case, on your death the house will have to be sold to pay the fees). The LA can even make you bankrupt to recover unpaid fees and the Trustee in Bankruptcy can recover assets given away up to 5 years before the bankruptcy.
What can you do to avoid having to sell assets to pay for care fees?
Giving a share or all of an asset to a child/children can result in difficulties because:
- Any one child could then force a sale of the asset
- Child may divorce
- If a child becomes bankrupt or has a county court judgement against him/her, the asset may have to be sold
- Child may die first (then what happens?)
Care Fee Plans
These are insurance policies that pay out care home fees. They can be purchased before you go into care (and are not expecting to) (called “pre-need”) or once in care (called “at-need”). Both types of policy are quite expensive and there is a limited number of insurance companies providing this product.
The cost of at-need schemes depends on individual circumstances but typically would be about 4 times the annual residential fee (depending on age and state of health).
I can write PPT Wills (with or without a FLIT) for you and can provide FPTs (drafted by specialist solicitors) and introduce Independent Financial Advisors who specialise in long-term care fee plans.
Avoid selling assets to pay for care home fees
It may not be possible to avoid selling assets altogether but there are ways that you can limit your liability; but is essential to have good independent professional advice before embarking on any course of action, which is where I come in.