When a person requires care, the local authority for the area in which they live will undertake a financial assessment of that person’s capital and income to determine whether that person is considered self funding, or if they should receive any assistance with their care by the Local Authority.
The current upper limit is £26,500 and the lower limit is £16,500. This means that if the person who requires care has assets and income in excess of £26,500, then they will be considered fully self funding. Once their capital dips below the upper limit, a further assessment is undertaken and the local authority should then contribute towards the cost of the care and once below the lower limit, the person’s contribution will be based only on their income, with the value of any capital being disregarded.
For those aged 65 and over, who are assessed as self funding, an allowance of £171 per week is given towards personal care (food, mobility, bathing etc) and £78 per week towards nursing care. Whether a person qualifies for both the personal care and nursing care payments will depend on the level of care they require.
Tempting as it may be giving away assets or transferring ownership to family members (for example the family home) does not necessarily mean that the value of the asset will not be taken into account in any financial assessment. This may be seen as an intentional deprivation of capital by the local authority, who can ultimately refuse to fund care or seek to reverse any transfer if there is no other valid reason for it having taken place.
There is no time limit set down in law for how far back a local authority can look for deprivations of capital and with tighter budget constraints, this is something that local authorities are taking a more hardened attitude towards.
However, it is not necessarily the case that taking up a place in a care home will result in a total loss of capital. By way of an example:-
Jane has a house worth £90,000 and other savings totalling £10,000. Like most others, she might be considered as ‘asset rich, but cash poor’. She receives a state retirement pension of £6,000 per year and an occupational pension of £6,500 each year. She goes into a care home which costs £32,000 per year (around the average yearly cost). During her stay, she is entitled to the Personal Care Allowance of £171 per week and Nursing Care Allowance of £78 per week. The total of her annual income (taking into account the allowances) is £25,448 per year. This means she needs to find £6,552 per year to fully fund her care costs. If she lets out her house at £400 per month, this would raise a further £4,800 per year, leaving a shortfall of £1,752 per year. This could be covered by a Deferred Payment Scheme.
This means that the fact she required to go into a care home did not totally use up all her capital. There will still be funds for her family to inherit.
It is an unfortunate fact that people tend to shy away from discussing possible infirmity and the loss of capacity in later life. Often by the time we are consulted a person may have already had a diagnosis of dementia or plans are having to be made for their future care needs. Families might have to consider going to court to seek appointment as Welfare and Financial Guardian to an elderly relative to allow decisions to be made about their welfare and future finances. This can be costly and take longer than relatives might think. Nobody is invincible and forward planning through the granting of a Power of Attorney can make things much more straightforward for relatives if you lose the capacity to deal with your own affairs.
At Morgans we can provide you with a bespoke service tailored to your present and future needs. We have a wealth of experience in wills, inheritance tax planning, Powers of Attorney and Guardianships.
If you would like to discuss any of these matters, or care fees and the Deferred Payment Scheme in further detail, then please contact Lynsey Rintoul on 01383 620222 (email@example.com).