The rules around paying for care can be complex, and whether a person is expected to contribute towards their care fees will depend on their individual financial circumstances at the relevant time.
At present, the capital threshold in England is £23,250. Where a person’s assets exceed that threshold, they may be required to contribute towards the cost of their care, depending on the outcome of the local authority’s financial assessment.
Residential care can be expensive, and fees often start from around £1,000 per week, although costs vary depending on the provider, the type of care needed and the location. As a result, many families are understandably concerned about how care might be funded in the future, including whether the family home may need to be taken into account.
Are there any exceptions?
In some circumstances, the value of a property may be disregarded for the purposes of a financial assessment for care fees. For example, this may apply where a spouse, civil partner, partner or certain dependants continue to live in the property, including in some cases a relative aged 60 or over.
Whether a property will be disregarded depends on the individual circumstances and the applicable rules at the time.
How we can help you plan ahead
At Arnold Greenwood, we can advise you on steps that may help you plan for the future and put your affairs in order. While no arrangement can guarantee that assets will be protected from care fees, careful planning can help ensure that your wishes are clearly recorded and that the right structures are considered at an early stage. We would usually recommend considering the following:
Reviewing your Will
Your will is an important part of planning for the future. If assets pass outright to a beneficiary who later requires care, those assets may form part of that beneficiary’s own financial means and may be taken into account in any future care fees assessment.
Depending on your circumstances, one option may be to consider whether a life interest trust in your will is appropriate. Broadly, this can allow one beneficiary to have the right to occupy a property, or to benefit from it during their lifetime, whilst preserving the underlying capital for other beneficiaries at a later stage.
This type of arrangement can be helpful in some family situations, but it is not a guaranteed way to prevent assets from being taken into account for care fees. Its effect will depend on the terms of the trust, the surrounding circumstances and the rules in force at the relevant time.
For example, if a beneficiary has only a right to live in a property, that may be treated differently from a situation where they are also entitled to receive income from trust assets. An entitlement to income may be relevant to a means assessment.
We can review your existing will and advise on whether any amendments or trust provisions may be suitable for your circumstances. As part of that review, we can also advise on wider estate planning, including inheritance tax planning where appropriate.
Gifting assets during your lifetime
Some people consider gifting property or other assets during their lifetime as part of their wider planning. However, this needs very careful consideration.
If a local authority believes that assets have been given away primarily to reduce or avoid care fees, it may decide that this amounts to deliberate deprivation of assets. In that situation, the local authority may still assess the person as if they continued to own those assets.
For that reason, gifts should never be made solely or primarily in the expectation that they will avoid future care charges. It is important to consider the wider reasons for any proposed gift, which may include family provision or tax planning, and to take advice on the legal and practical consequences before taking any steps.
Lasting Powers of Attorney
Lasting Powers of Attorney are a key part of planning for later life and are often just as important as making a Will. There are two types of Lasting Power of Attorney:
- Property and Financial Affairs
- Health and Welfare
A Lasting Power of Attorney allows you to appoint one or more trusted individuals to make decisions on your behalf if you lose mental capacity. In the case of a Property and Financial Affairs LPA, you can also choose for it to be used with your permission while you still have capacity.
A Property and Financial Affairs LPA can help your attorneys deal with matters such as:
- operating bank and savings accounts;
- paying bills and household expenses;
- managing pensions and other income;
- dealing with property matters, including a sale if necessary; and
- liaising with care providers and other professionals about fees and funding.
A Health and Welfare LPA allows your attorneys, if you lose capacity, to make decisions about matters such as:
- your care arrangements;
- where you live;
- day-to-day welfare;
- medical treatment; and
- life-sustaining treatment, if you choose to give that authority.
If care is needed in the future, LPAs can make it much easier for those close to you to support you and deal with practical decisions promptly and lawfully.
If you do not have a Lasting Power of Attorney in place and later lose capacity, your family or friends may need to apply to the Court of Protection for the appointment of a deputy. This process can take time, is usually more costly, and may delay important decisions about your finances or care.
Putting LPAs in place early can therefore provide reassurance and help ensure that the people you trust are able to assist when needed.
