Residential Care Funding: The Rules, the Myths and the Solutions
As we are all living longer, more and more of us find ourselves in need of some sort of residential care in later life. How it is paid for, and by whom, has been a topic of debate for some time.
Lee Young, partner and Head of our Wills and Tax Team, provides an overview of how the funding system works, and defines some of the key terms used.
Assessment of care needs
If you require residential care, your local authority (LA) has a legal duty to arrange it. The first stage is an assessment of needs.
If the LA will be involved in meeting your needs, then it will prepare a care support plan. This will include a personal budget; the amount the LA calculates it will cost to meet your eligible needs after financial assessment.
Financial Means Test for Residential Care
The LA will also carry out a financial assessment, which determines how much you will have to contribute towards your care.
This is based on your income and capital. This can be complex, with a number of calculations and ‘disregards’ that can apply: however the final figure will fall into one of three bands.
- If you have less than £14,250 the LA will fund your care
- If you have more than £23,250 you will be ‘self-funding’
- If you have between these amounts you will have to make a contribution to your care.
Third party top-ups
If your choice of care home costs more than your personal budget, someone will need to pay the difference.
For example, In Bournemouth, the LA will pay up to £565 for weekly care. The average national cost is £876 per week. In this scenario, someone would need to pay the £311 difference to ‘top-up’.
Capital and Income
All your income, other than a weekly “allowance”, will be used against your care fees, irrespective of whether or not you are a self-funder.
Most forms of capital are included in the financial assessment. Savings and bank accounts are included, as are property, bonds, and stocks and shares.
Disregards - values ignored for care home funding
There are a number of disregards, values ignored in your financial assessment, such as certain life insurance policies, annuities, and trust interests.
Sometimes property can potentially be disregarded too, for example if it is occupied by your partner or an elderly or incapacitated family member.
Deliberate deprivation of capital
Deliberate deprivation of capital is giving away assets in order to become eligible for LA funding.
LAs will consider both the timing and motives of the gifts when considering whether the rules have been breached. If the rules have been breached then you will be treated as still owning the assets given away.
There are of course good reasons why assets are given away. However, falling foul of these rules is always problematic, so when making any decisions about such matters, it is always sensible to seek appropriate legal advice.
If you are self-funding, you have a number of options. These include selling your home, equity release, or renting your home out. You can use cash from savings and investments, or look into care annuities.
Rather than selling your home to pay for care, you might be eligible to take out a Deferred Payment Agreement, a loan from the LA, secured against your home, to meet the costs. It is available to permanent care home residents after 12 weeks.
Real People. Well-rounded advice. Brighter outlooks.
Lee Young is a Partner, qualified solicitor and tax advisor. He is perfectly placed to advise on your later-life legal matters.
Frettens offers well-rounded legal advice on how best to prepare for these later life issues. For a free initial consultation at our Ringwood office, call us on 01425 610 100 or click here.