Care Free Planning Services
Long Term Care Free Planning
An essential part of Financial Planning
With increasing life expectancy contributing to an increasingly aging population in the UK, the likelihood is that many of us will need to spend time in our later life receiving some form of residential care or assistance.
It is forecast that one in ten people will spend over £100,000 on care fees during their lifetime, with the average person who funds their own care being resident in a home for four years.
There are over 430,000 elderly and disabled people currently living in residential care, with one in five of 70+ year olds now receiving care in their own homes.
Over the next 50 years, the elderly population is expected to increase by more than 40% meaning that Long Term Care Fee Planning is fast becoming an essential part of Financial Planning.
Residential care is expensive to deliver and the costs continue to rise ahead of inflation each year, with average costs in the south of England now over £30,000 per year.
How is Long Term Care funded?
For those with little or no eligible assets, your local authority has a legal obligation to help with some or fund fully your care needs. If you are eligible for funding support, your local council could pay some or most of the fees. The council will carry out a care needs assessment. If this concludes you need care in a care home, they will carry out a means test to work out whether you qualify for help with the cost. This will look at your income and capital. They will offer a limited choice of the homes you can go into, and without the right protections in place for your assets and wealth, or your health and wellbeing, they could appoint someone to manage your affairs on your behalf.
For those owning their own property, exceeding the £23,250 threshold (correct as of August 2020)
is almost a certainty, and will therefore mean you have to fully fund your own Care Fees.
The good news is that Long Term Care Fee Planning can help may people to plan for their care in later life without depleting their hard-earned wealth and assets and effectively ring-fence an inheritance for future generations.
The results of effective Long Term Care Fee Planning will be that the local authority will have to put their hand in their own pocket and pay their fair share of your Care Fees, allowing your loved ones to utilise your wealth to pay top up fees to give you the very best level of care, quality of life and dignity.
What is the average and maximum you have to pay for care home fees?
Care fee costs vary considerably around the UK, driven by factors such as staffing costs, building rent and rates costs, and other market factors, as well as your financial circumstances.
Costs average around £650 a week for a care home place and over £850 a week for a place in a nursing home. You can use this cost of care and eligibility in England tool to get an estimate for care costs in your area.
Research indicates that the average cost of residential care varies drastically depending on where in the UK you live, creating a postcode lottery for vulnerable people in need of care.
If you live in London and the South of England, you can expect to pay as much as £230 a week more than if you live in the North West of the UK.
In 2020, the Government announced a cap on care costs, to be set at £72,000.
Despite the headlines, the cap of £72,000 does not simply mean your Local Authority will immediately start to pay your fees once you have paid £72,000 towards the cost of your care.
The £72,000 cap only applies to the cost of care and crucially not to the amount you pay for accommodation in a care home. In other words, the cost of accommodation, food, heat, and light, and other ‘general living’ costs are excluded from the £72,000 cap.
Given average life expectancies for people in care, it is highly likely many people’s care bills will fall below the £72,000 overall cap.
In a further blow to those people calling for more fundamental reform, the cap only applies to the Local Authority rate of care costs, not what you are paying in a private care home!
How much will the council pay for a care home?
The council will contribute towards your care home fees, but you will also have to pay towards them.
If you have savings and capital worth between £14,250 and £23,250: The council will contribute towards your care home fees, but you will also have to pay towards them. You will pay £1 per week for every £250 in savings and capital you have between £14,250 and £23,250.
You will still have to contribute most of your weekly income. If you have savings and capital worth over £23,250: You will have to pay all of your care home fees. This is called self-funding. If your money reduces to less than £23,250, you should contact the council for another assessment.
How is the value of my home assessed for Care Fee contribution?
The value of your home will not be taken into consideration if any of the following people still live there:
- Your spouse, civil partner, or partner
- A close relative who has a disability
- A close relative who is over 60
This is known as a mandatory disregard of the value of your property. In some cases, the council may choose to ignore the value of your home in other circumstances – for example, if someone gave up their own home to live with and care for you. If the carer moves out or your home is sold, the value will then be considered in the assessment.
If your home is taken into consideration in the financial assessment, you have several options.
The 12-week property disregard
The local authority must disregard your property in the financial assessment for the first 12 weeks of your care home placement. If the property is sold in the 12 weeks, the disregard ceases to apply from the date of sale, and the proceeds are counted as capital. If your stay was initially temporary, the 12 weeks run from the date it is decided your placement is permanent.
This is to give you time to sell your home. During this time, you will pay the council or care home any contribution from your income and savings that you have been assessed as having to pay.
If you have been unable to sell your home after 12 weeks, its value will still be counted as part of your capital.
A council loan
While your property is being sold, the council can loan you money to pay your care home. This is sometimes called interim funding or a bridging loan.
This short-term financial help will stop once your property sells if, when added to your savings, it is over £23,250 (minus some selling costs). You will usually have to sign a deferred payment agreement and you will have to repay the council the money it has loaned you.
Delay the sale of your property: deferred payment agreement
If you do not want to sell your property while you are living in the care home and your savings are less than £23,250, you can ask the council for a deferred payment agreement.
This means the council pays your care costs and claims the money back later once your property is sold, when you move out of the home, or after your death.
The council can charge interest on deferred payments to cover their costs. You will also have to pay an administration fee for the council to manage the deferred payment. You could choose to have both of these charges included as part of the loan if the council thinks your property is worth enough to allow this.
You can cancel the deferred payment agreement, but only if you have another way of paying the care home fees. You will need to repay what already been loaned to you to avoid further interest accruing on the loan.
The council will offer a deferred payment agreement if they think it is appropriate and they will be able to get their money back in the future.
Renting out your property
If you rent out your property to tenants, its value will be considered in the financial assessment. You may be assessed as needing to pay all your care costs. You will then need to make sure that the rent you charge, when added to the rest of your income, covers the full cost of the care home fees.
What happens if you jointly own a property?
Your share of a jointly owned property will be considered in the financial assessment if the other owner:
- Does not live with you
- Does live with you but is not your spouse, civil partner or partner, a close relative over 60, or with a disability, or is someone who the council has said can carry on living there
The council cannot simply assume that each joint owner has an equal share in the property. For example, if you have bought a property with another person, they cannot assume you own 50% of the value. Your share could be more or less than this, based on what someone may pay for it. The council may need to get a precise valuation.
Your beneficial interest is the amount you are entitled to receive from the sale of your property or the sale of your share of a jointly owned property.
If you legally own a property but have not contributed any money towards the purchase, improvement, or maintenance of the property, then the council may decide you do not have any beneficial interest (or share) in it. If they conclude you would not be entitled to receive any of the value of the property if it were sold, it may not be included in the financial assessment.
Can I give my wealth and property away so it cannot be assessed?
Giving away your belongings used to be a way people tried to reduce their assets liable to care fees. However, with the introduction of the Deprivation of Assets rule in the Care Act 2014, if you give away your home or savings deliberately to avoid paying for your care home fees, this is called ‘deprivation of capital’.
Deprivation of Assets means you have intentionally decreased your overall assets to reduce the amount you contribute towards the cost of care services provided by the local authority.
The local authority must show that you knew you may need care and support in the future when you carried out this action. It is therefore an evidence-based test of both foreseeability and intention.
The 7-year Inheritance Tax gifting rules do not apply to social care. Any past disposal of assets, over any length of time, can be considered as possible deprivation, if the disposal happened at a time when you knew you were likely to need care in the future.
The council can treat this capital as if you still owned it and include it in their financial assessment. This is called notional capital. They must look at why and when you gave your savings or property away. For example, if you gave your grandchildren some money as an early inheritance three years before you needed care, it may be unreasonable for the council to assume you did this to avoid paying care home fees.
However, if you signed your property over to your son when you were unwell or diagnosed with a long term illness and it looked likely you would need residential care in the future, the council might decide that you did this to avoid having to pay care home fees.
Some of the ways in which you may be considered to have deliberately deprived yourself of capital include:
- Giving away money
- Transferring the ownership of your property
If you do this, in the knowledge that you will likely need long term care in the future your local authority will still consider these assets in your Estate in the financial assessment to reclaim what is owed. It is perfectly acceptable however to give your assets away for any purpose, including the reduction in care fees as long as you are healthy and there is no foreseeable need for you to have care imminently or in the future.
How can I legitimately mitigate paying care home fees?
There are legitimate reasons as to why you can gift your assets without them potentially being used as part of the calculation to see if you have to pay for your care fees.
It is possible to put your house into a Trust and assign your property to someone else, such as your children. However, there have to be other reasons as to why you put your property into a Trust and not just because you do not want to fully fund your care fees.
Such Trusts must have been set up and made live before any care needs were foreseeable and on the horizon.
The three main types of Trusts that people use to protect their property are typically:
- Protective Property Trust
- Life Interest Trust
- Interest in Possession Trust
We VERY strongly recommend that you speak to our Trust specialists, if you want to consider these options so you can ensure the Trust is valid and you are not doing it simply to deprive yourself or the local authority of assets.
Alternatives to going into a care home are to consider having care at home, either on a part-time or full-time basis.
The most popular way to avoid selling your house and provide live-in care at home is to use Equity Release. If you own your own house, you can look at Equity Release as an option as this allows you to take money out of your house and use that to fund your care. Again, we strongly recommend you speak to our experts before progressing down the Equity Release path. Another option, depending on your savings and health status could be to consider using a Long Term Care Fee Annuity, this is a specialist type of Annuity designed to fund your care needs.
If you have assets that take you above the threshold you must speak to an advisor and get financial advice about what you can do with your savings to make them last as long as possible while you fully fund your care.
How do I get in home care for the elderly?
There are lots of home care services available, depending on what you need. Your local authority will decide if you are eligible for these services, or for home carers or a personal assistant.
The kinds of services available to help you in your own home include:
- getting in and out of bed
- bathing and washing
- preparing meals
- fitting equipment and adaptations to your homes, such as stairlifts and bath seats
- going to a day centre
There are many benefits to choosing home care. Homecare is a lot more flexible, offering different levels of care without a long-term commitment.
For example, you may just need help with everyday tasks whilst you are recovering from an illness. When you are feeling better you may not need the extra help.
How do I organise my home care?
Arranging home care ideally starts with getting an assessment of your care needs by your local council. There is no charge for this, and you are entitled to one regardless of your income and savings.
After your assessment, your local council will provide a written care plan if you are eligible for support, or will give you advice and information on your other options if you do not meet the criteria for help.
Do I have to pay for carers at home?
Most local councils charge for the services they provide in your home. Some place an upper weekly limit on the amount you have to pay.
Before charging you for services, your local council must work out how much you can afford to pay, and this amount should leave you with a reasonable level of income.
How much does it cost for a carer at home?
As you would expect, these costs can vary widely and are incredibly unique to an individual’s requirements and needs. Your free local council care needs assessment will provide you with a recommended care plan and all its associated costs. You can decide what elements you want to utilise before making any payment commitments. The plan may also detail any benefits and allowances available to you that you are eligible to claim that will support you funding your care plan.
Can I arrange my own home care?
If you are assessed as needing community care services, you may be able to choose something called direct payments.
These are regular payments paid by the council directly to you or a person you trust and allow you to buy and arrange your own care.
Alongside direct payments, the Government has introduced personal budgets which aim to give people more choice and control over how they arrange and pay for their social care services.
Request advice from a Private Care Consultant
Whether going into a care home or wanting to have care delivered in your own home, it can be a minefield to know which care providers you can trust to give you and your loved ones the best level of care you deserve. There are private care consultants, who have a vast knowledge of both the public and private care sector, they can guide you through the assessment process, make sure you claim all available allowances and reliefs and have local knowledge of the best care providers and care homes in your area.