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Long Term Care
Our life expectancy is continuously rising, meaning that more and more of us will need some form of long term care as we get older. A big issue in the UK is meeting the cost of this care. Most people have heard of Inheritance Tax, but so few seem aware that your Local Authority may take all of your assets to fund long term care long before this is even an issue!
Who Will Pay For My Long Term Care?
In the UK, each local authority has a duty of care to provide long term care to those who need it. They do, however, have the power to cover these costs with finances taken from you and your family. This means that they can force the sale of your assets, including your house, in order to pay for these care costs.
The Community Care Act
Since April 1993, this Act has allowed local authority’s to calculate the worth of your assets at the time you are taken into care. They have the right to force the sale of your home. If they believe that you have given assets away in the past deliberately to avoid this, they may reclaim these back too.
If your capital exceeds £23,250.00 then you will be expected to fully fund your own care, until you have £14,250 left. If it is less than £14,250.00 then your care will be paid for in full by the state. (These are the figures for England; the amounts vary in other parts of the UK.) In-between these amounts is a sliding scale of how much you are expected to contribute.
Home care:
Two hours of home care a day can easily amount to over £200.00 a week, and a live-in carer starts at approximately £700.00.
Residential care:
These costs vary a great deal according to location and an individual’s needs. Average care home fees across the UK are approx £2000 per week.
Home owners and Forced Sale
Home owners and Forced Sale
Owning a home will usually mean your assets fall above the £23,250.00 threshold, meaning that you will need to pay for your care. An estimated 70,000 homes are sold each year to pay for their owners long term care.
If you have difficulty selling the property, then the Local Authority will pay for your care for the first 12 weeks, after which they may agree to a ‘Deferred Payments Agreement’ which means they will pay for your care in the first instance, and recoup the costs once it is sold.
Property will not be included in the means test if somebody still lives in it, for example:
Your spouse, or a partner you are now separated from who has responsibility for a minor.
A relative who is over 60 or incapacitated.
A minor who is dependant on you.
Occasionally, a person who gave up their own home in order to care for you.
Deliberate Deprivation
The authorities will also look into past property ownership and if they feel you have purposefully transferred ownership of your property or put in a Trust solely to lower your capital, then they have the right to take these assets back. This is why it is important to start planning for long term care as early as possible. If long term care is in your foreseeable future then the Local Authority will see it as a ‘deliberate deprivation’ of capital, and will be seen as a deliberate attempt at avoiding care costs. Local Authorities can access your medical records as proof so please do only set up provisions as part of you general Estate Plan.
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How Estate Planning Can Help With Long Term Care Provision
With careful Estate Planning, it is possible to set in place strategies to protect your Estate from the implications of long term care. It is estimated that 1 in 4 of us will need long term care so it is important to start thinking about this as part of your Estate Plan now..
Property will not be included in the means test if somebody still lives in it, for example:
Renting out your home instead of selling it, so long as this steady income can cover your care costs after any fees.
Pensions, savings or family contributions.
Some Insurance Policies will include a guaranteed income in the case of a long term care plan.
Property Protection Trust For joint home-owners. The Trust only comes into existence once the first spouse dies; then their half of the home will be put into the Trust rather than being given to the surviving spouse (their right to occupation will be protected). If the widowed spouse then needs long term care, the Trust will continue to protect the 50% that has been placed in it. This prevents that half of the home being used in the local authority’s assessment of capital. This means that once the surviving spouse passes away too then any children will get at least 50%.
Family Protection Trusts You can put your assets into a Family Protection Trust whilst you are still alive. Any assets in the Trust are generally not included in your Estate, avoiding your local authority being able to force their sale. The Trust will be transferred straight to your named Beneficiary upon your death. This gives you peace of mind that your home will go to your loved ones, and not the Government!
Estate Planning can help you to come up with sensible solutions to prevent your home and other assets being sold to pay for long term care. There are several different options, and which is best for you will depend on your own circumstances.
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