Care home fees and planning for the future

For many of us, the prospect of planning for the future and what it may involve can be quite intimidating. The idea of being responsible for paying for care home fees, for example, can be quite complex and require a lot of knowledge and planning to ensure your future is as smooth and straightforward as possible.

Depending on your specific care needs and financial position, your local authority or local NHS Trust may have a responsibility to pay for either part of or all of your care fees. In addition to this, if you are planning for the future well in advance, it may be a case of managing your assets to ensure your estate isn’t swallowed up by care home fees.

Stephensons Solicitors LLP will be able to offer practical and proactive advice in regards to your rights in these circumstances, as well as being able to challenge the decisions of your local authority or NHS Trust if they do not pay your care home fees when they have a responsibility to do so. To talk to a solicitor at Stephensons about your current situation, please call 0203 837 3658 or fill out our online enquiry form and someone will contact you as soon as possible.

 

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Assets and care home fees

If there is a possibility you may go to live in a care home in the future, there are a number of things you need to be aware of and consider in plenty of time, if you are able to do so. Care home fees in the UK can be extremely expensive, therefore planning in advance for how these fees will be paid needs to be carefully considered.

According to Laing & Buisson Care of Older People’s UK Market Report 2014/15, care home fees cost on average between £500 and £700 per week – whereas care home fees with additional nursing costs can cost on average between £600 and £1,000 per week. Numbers vary depending on whereabouts in the UK you live, or the quality of the care home which you choose to live in; but overall, the fees are often very high.

In regards to your assets, if your estate adds up to more than £23,250 in England and Northern Ireland, £23,750 in Wales or £25,250 in Scotland, you will be responsible for paying your own care home fees. (This threshold is set to rise in 2020.)

If your assets equate to less than this, you will be required to contribute to a percentage of the fees based on means-testing. This covers factors such as your income and savings, as well as your property if you live in a care home for more than 12 weeks and expect to stay there long-term. Although, your property will not be included if your partner or spouse still resides in the property, and when your savings drop below £14,250, it is only your income that is measured in a means assessment.

How do I protect my assets from being swallowed up by care home fees?

There are a number of options available to protect your assets when planning for the future and the possibility of having to pay for care home fees. Gifting your assets may be one way of ensuring your children or other family members receive some form of inheritance; however, this often has to be done far in advance of going into a care home. This can obviously be quite a complex and confusing concept, as most people do not know if or when they may need to live in a care home in the future.

If you do decide on gifting your assets, it is advisable that you receive legal guidance to ensure you understand the entire process, as well as possible consequences of gifting incorrectly and all the legal implications of gifting a property. For most people a property is the most valuable asset in their estate, so it can be a popular choice to gift a property and savings in advance of a financial assessment in regards to residential care. Local authorities have strict rules when conducting financial assessments, such as how far in advance you gifted your assets, and if you may have done so to avoid paying care home fees.

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Deliberate deprivation of assets

If you are planning on moving into a care home and your local authority is carrying out a financial assessment, they will enquire about assets that were previously owned in addition to any current assets you may have. With properties in particular, it is very simple for authorities to trace the ownership history, so it is advisable to always be 100% truthful in regards to your previously owned assets.

If your local authority comes to the conclusion that you have purposely gifted your assets to increase your eligibility for local authority care home funding, this is called “deliberate deprivation”. This covers things such as gifting your home to your child, or selling an asset to a family member for far less than its genuine value in order to ensure it is no longer a part of your estate.

Obviously not all gifting of assets are deliberate deprivation; there are a wide variety of justifiable reasons for people to give away assets to family members. You may, for example, be looking to gift your children or grandchildren with lump sums of money to avoid paying inheritance tax, and so you are able to enjoy seeing them benefit from it. Stephensons have worked with clients in the past who have done so; for example, gifting grandchildren money to go towards a deposit on a property, or gifting children money to spend on a once-in-a-lifetime holiday.

What defines the gifting of assets as “deliberate”?

If your local authority is conducting a financial assessment to determine who should be responsible for paying for your care home fees, they will take a variety of things into consideration when deciding the outcome. For example:

  • Amount – have you gifted a significant amount to a family member or friend which will make a noticeable difference to their capital?
  • Reason – if you have gifted your assets to relatives, was this done specifically to avoid paying for your own care home fees? Or did you simply want to see your relatives enjoy their inheritance before you ever knew you might need to pay for care?
  • Timeframe – when did you gift your assets? If it was quite a while before you were ever in the position where you might need to move into a care home, it is highly unlikely that this will be considered. Although if it was done quite recently, your local authority might question your motives and it may be considered as notional capital.

What is notional capital?

If you have gifted your assets to avoid paying care home fees and your local authority decides it has been done deliberately, the total value of your assets can still be taken into account as part of your financial assessment, despite that fact that you may no longer own them.

The total value of your assets that you currently own and used to own is your “notional capital”, which could affect the local authority’s responsibility for paying your care home fees, and mean the relative you gifted your property or savings to may be responsible for paying your care home fees. This is why gifting your assets can have serious consequences, and should be done as far in advance as possible if you believe you may need to pay for your own care home fees in the future, to protect both yourself and your relatives. Furthermore, if your local authority has been paying for your care fees but later concludes that you have gifted assets deliberately in the past to avoid being financially responsible, they may be able to enforce powers of recovery.

What are “powers of recovery”?

If, in the future, you are living in a care home with your fees being paid for by your local authority, and they rule that you deliberately deprived yourself of assets, they may be able to enforce “powers of recovery” - the power to claim the care costs back from the individual who the assets were gifted to. This means your children or grandchildren could end up having to pay back your care home fees to your local authority in a lump sum.

By law, your local authority may have the power to recover finances by beginning County Court proceedings, although this should only be done as a last resort when they have attempted other means of recovering the debt. There are a variety of options when it comes to protecting your capital as well as avoiding breaching your Local Authority Guidelines; for example, evidence of receipts for legitimate expenditure, repaying debts and purchasing an investment bond. However, the most popular option, for a number of reasons, is setting up a discretionary trust.

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What is an Asset Protection Trust?

A trust is a legal arrangement created when assets such as property, shares or savings are transferred to a small group of people known as 'trustees', to be held on behalf of one or more people who are the ‘beneficiaries’ of the trust. For example, your children may be your trustees in order for them to be able to benefit from your assets in the future, whilst you and your spouse are the beneficiaries.

When preparing for the future and wanting to avoid paying care home fees in order for your children or grandchildren to be able to benefit from your capital, we recommend a trust is set up as far in advance of you moving into a care home as possible. Legally there is a six month rule, in regards to deliberate deprivation of assets, when setting up a trust – as long as it has been arranged and finalised at least six months before you move into a care home, your assets will be protected from your local authority. However, we still advise that if you do decide on setting up a trust, you do so with as much time to spare as possible.

For understandable reasons, many people can be worried about losing control of their assets after they have been moved into a trust, but the reality is there is nothing to worry about. When setting up a trust, you can instruct your trustees on the specifics of how you would like your assets to be used and/or spent. Despite this not being legally binding, it is highly likely that if you are setting up a trust to benefit your children or grandchildren, then your wishes will be fulfilled.

There are a wide range of benefits of setting up a trust. For example:

  • Domestic matters – wanting to leave money to your children, but perhaps they are too young to deal with your assets
  • Taxation – avoiding paying expensive inheritance tax
  • Avoiding sideways disinheritance – if you or your partner dies and the remaining spouse inherits the whole estate, a trust protects the assets if the remaining spouse remarries

For more information on setting up a trust, please click here to read more.

Contact Stephensons today to start preparing for your future

Here at Stephensons, our legal experts have a wealth of experience in helping people to adequately prepare for the future, and ensure that their assets are protected from being swallowed up by care home fees. There are a variety of ways to protect your assets, and one of our solicitors will be happy to help and talk your through your own personal situation and possible next steps when planning for the future. Whether it is gifting your assets, setting up a trust or otherwise, we are available to discuss your possibilities and what is best for you and your family.

Contact Stephensons today on 0175 321 6399 or kindly fill out our online enquiry form and a member of the team will contact you as soon as possible.

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