Care Home Fees - Planning for Future

Care homes fees and planning for the future is a hot topic at both local level and national level.

Just last week the Gloucestershire Echo ran an article on how the care system for the elderly is in crisis. Age UK Gloucestershire reported that, since 2004/5, net public spending on care has risen by just 0.1 per cent per year, yet over the same period the number of people aged over 85 who require the care has risen steadily by 4 per cent each year. Clearly, government spending is far outweighed by the demand and therefore, an ever increasing number of people are required to pay privately for their care.  Even those who fall within the scope for local authority funding are finding that the level of funding often does not meet the costs of the care. This shortfall – currently running at an average of £60 per week or over £3,000 per year - is a shortfall which family members are often asked to top up, despite the provision of the care being a statutory duty of the state. In these times of economic austerity the position is unlikely to get better.

Currently, if you have assets of more than £23,250, including the value of your home, you are not eligible for help with care fees.  If your assets are worth less than £14,250 the state will pay all your costs. If you lie somewhere in between, you are expected to make a contribution towards the care costs.  If you do not qualify for local authority support, the statistics show that the average person entering a care home will live for two years and will run up fees of £30,000 per year. As a result, many people are now having to sell their homes in order to fund their care. It is estimated that UK over 65s own £765 billion of unmortgaged property which could be up for grabs.  

The Dilnot Commission on the future of care funding is due to report next month and whilst there is no way of second guessing what will be reported, two things we can foresee are:

1.    that the need for planning for the future will continue; and

2.    if anything, it is likely that more and more people will be required to fund their own care. 

A proposal that everyone will be required to fund the first £50,000 of care fees with the rest of the fees being met by the state is being considered but realistically, this proposal will not cover care for many people and there is still the issue of finding the initial £50,000.

What can you do?  The key for planning for the future is to act early and at a time when the need for care was not foreseeable.  This is because there are strict rules regarding intentional deprivation of capital. If the local authority is able to show that you deliberately reduced your assets in order to reduce your capital for the purposes of assessment for care home fees - i.e. spending vast amounts of money quickly or transferring assets to family members - then potentially, the local authority could require that the transfer be reversed or could apply to make you bankrupt. Either way, the value of that assets you have parted company with will still be taken in to consideration when assessing your capital.

It will come as some small reassurance to know that local authorities will not generally force a sale of the house where one member of a couple wishes to carry on living at home once their partner has gone into care. Where one member of a couple requires care, the value of the family home should be disregarded when it continues to be occupied by the remaining spouse or partner or by a relative who is aged 60 or over or is incapacitated, or a child of the person requiring care who is under the age of 18.

A tried and trusted way to help protect against the impact of care home fees involves looking at the way you and your spouse/partner own your home and preparing Wills that can at least protect half of the value of your home on the death of the first to die. Careful estate planning can not only potentially reduce your liability for care home fees, but it can also save on inheritance tax thereby maximising assets for future generations and protecting your family’s wealth from worries like divorce or bankruptcy.

If you are in the situation where a close family member will soon need to go into care, the local authority may well place pressure on you to arrange the care for your relative yourself. It may therefore be in your relative’s best interests financially for you take a step back and advise the local authority that you are not prepared to assist. In that instance the local authority is required to take on the role of finding a suitable home or make suitable care provision themselves. This can be an emotionally difficult thing to do when it involves a loved one, as you will want to ensure they are happy and safe. There is also the issue of setting up funding arrangements which can present the difficulties referred to above and other practical issues.

Finally, many people who go in to care homes are unable to deal with their affairs themselves and experience difficulties in everyday tasks such as arranging for bills to be paid, transferring money between accounts and selling their property. It is common for family members to step in to try to assist but the institutions often refuse to deal with them causing deadlock to occur. This can all be prevented by preparing a lasting power of attorney (LPA), which is a legal document that gives authority to a nominated person (the attorney) to deal with your financial affairs on your behalf. The person you nominate must act in your best interests and consult with you over decisions and is ultimately answerable the court for their actions. Without an LPA, no one else has the authority to deal with your affairs, which could become a serious issue should you lose the ability to deal with your affairs yourself, the other option involves a lengthy and expensive court application, which on top of care homes fees, further reduces your hard-earned capital.

As ever, it is always better – and cheaper – to avoid a problem in the first place rather than having to sort it out.

If you would like any more information on planning for care home fees, wills or powers of attorney then please contact Gareth Parry, Kelly O’Brien or Samantha Clarke, who will be more than happy to assist you.