The cost of care

 The Cost of Care

It is estimated that within 25 years, a quarter of the UK’s population will be over 60 and with the majority of people being expected to contribute towards costs of care, it is no surprise that this is a topic often at the forefront of people’s mind.

Who pays for a care home?

Before a Local Authority takes responsibility for the costs of an individual’s care, it must carry out two assessments:

  1. an assessment as to whether an individual needs care; and
  2. a financial assessment (means test).

Even if an individual is assessed as not entitled to a Local Authority contribution to the costs of care, the Local Authority must still satisfy itself that the appropriate arrangements can be made by the individual or others on his behalf. The advantage of this is that the cost and task of arranging the care, although not the care itself, are borne by the Local Authority.

The means test

If an individual has available capital of over £23,250, they are treated as being able to meet the full cost of care.

Individuals with capital between £14,250 and £23,250 are expected to make some contribution from capital and income.

Individuals with less than £14,250 should not have to make any contribution from capital, but may still have to contribute from income.

Assets included in the means test

Capital such as bank and building society accounts, National Savings accounts, premium bonds, stocks and shares and property.

Assets excluded from means testing

An individual’s property (or share of a property) will usually be included in the assets subject to the means test. There are, however, occasions where it may not be included such as where a partner still occupies the property and where a relative aged 60 or over lives in the property.

The following assets are also excluded:

  • personal possessions (except where personal possessions have been purchased to avoid the charge)
  • the surrender value of life assurance policies
  • if an individual is a beneficiary of a trust and does not have an immediate right to capital

Lifetime planning

Individuals often do tax and estate planning which results in gifts being made to family members or monies being put into trust. Such planning may also have the effect of ringfencing assets so that they would not be included in a means test.  We can help with this.

Deprivation of capital

Care has to be taken when financial planning decisions are made which result in an individual’s assets being reduced as a local authority may rely on rules which allows it to take into account the value of assets given away when means testing.

What is considered by a Local Authority on assessment is whether any assets have been intentionally or deliberately removed by an individual to avoid paying for care fees. A Local Authority has to show that there was an intention to deprive in order to take capital into account.  Ringfencing capital through a Will is excluded.

The timing and motivation behind a disposal are key factors.

There are many reasons why people choose to give away assets or ring fence assets in trust. For example, a trust may be created for the benefit of children but to also protect those assets in the event of the children’s death, divorce or bankruptcy.

There are therefore options available which would not fall foul of the deprivation of capital rules but care has to be taken.