What is the threshold in money terms below which the local council pays for care for an elderly person in a care home, and how much do they pay? Does it vary from one council to another, if so by roughly how much? G.D. Windsor
Jonathan Ellis: This depends on your income and savings. There is a fixed ‘upper limit’ to the amount of savings you can have and still get funding from the local council. In England and Northern Ireland, if you have more than £21,000 in savings, you will have to pay the full cost of your care. The value of your home will usually be counted as capital – this usually means that you will be expected to sell it to pay the fees.
If you have less than the upper limit in savings, or when your savings drop to this level, then your income and what savings you do have will be taken into account to work out how much you will pay towards the home fees. When deciding how much you have to pay towards the fees, the local council must always leave you with some money to spend as you wish each week. This is called ‘personal expense allowance’ is around £19.60 a week.
Each local council will pay varying amounts towards your care, depending on your needs, but it should tell you how it has worked out how much you will pay. You need to ask for this information in writing.
How do I reduce the amount of my assets available for the government to 'claw back'. I have a son in Australia (permanent resident)& a daughter in the UK - is it possible to set up a 'Family Trust, thus reducing my wife and my capital? I am 61 and semi-retired. D.L. Callington
Alex Pegley: Any arrangement entered into explicitly to avoid paying for care is likely to fall foul of the deliberate deprivation of assets rules. How vigorously the local authority applies those rules will depend in part on how soon before entering care you set the plan up.If assets are passed into a trust for inheritance planning, or simply to ensure your wishes are complied with after your death, it is unlikely they will form part of you Notional Capital for assessing care fees funding. A trust which would provide you and your wife with an income for life as well as reducing Inheritance Tax liability your estate might face is a Discounted Gift Trust.
I have an elederly Mother in law who is worried that her savings and her home will be used to pay for her care if and when she is no longer able to look after herself. She is planning to transfer her savings to her two daughters - will this prevent her having to pay for future care ? M.G. Nairn
Alex Pegley: Unfortunately, if your mother transfers assets to her daughters for the purpose of avoiding paying for her care the local authority could treat this as deliberate deprivation of assets and they are likely to be deemed part of her Notional Capital.
The rules are particularly complex, however, if transfer of capital occurs within 6 months of needing care - then she is more likely to fall foul of the rules. If the gift is made more than 6 months before needing care, then the local authority must prove that a significant motive for making the gift was to avoid payment of fees. Particular scrutiny is likely for financial gifts or the family home.
Inheritance tax planning is likely to be seen as a bona fide reason for transferring assets, especially if to a trust. Such trusts can place future investment growth outside of your mother’s estate, as well as providing her with an income (or access to capital), reducing her estate for IHT purposes, and allowing her to keep control of her assets.
My mother went into residential care in the middle of January this year. The local authority paid for some of the fees and I topped up the payment from my mother's pension and attendance allowance. After 8 weeks, her attendance allowance was withdrawn and, while the local authority have continued to pay some of the fees, they have to be paid back from the proceeds of sale of her house (which is on the market). Am I right in thinking that, if I had paid all of my mother's fees after the first 8 week period until the house was sold, her attendance allowance would not have been withdrawn and she would have been considerably better off? C.C. Bristol
Alex Pegley: It sounds to me as if there may have been some confusion in your mother’s local authority’s interpretation of the rules relating to Attendance Allowance. The first 12 weeks of a permanent stay in residential care the home is disregarded for means testing. If your mother’s other assets were below the Capital Threshold then the local authority should (partially) fund her care for those 12 weeks. The Attendance Allowance rules state that if the local authority is funding your care you do not qualify for the benefit. As the local authority was funding your mother’s care, she should have lost her entitlement to Attendance Allowance (after a 4 week period).After 12 weeks your mother’s house should become part of her assets for means-testing and as a result she would become self-funding (albeit through a deferred payments agreement, whereby the local authority pay the fees and then claim these back when the property is sold). Where people are self-funding, even through deferred payments, they are entitled to Attendance Allowance, that your mother isn’t receiving it would appear to be due to a misunderstanding by the local authority.
I am 61 and my son aged 30 lives with me. Is there anything that I can do to ensure that he can stay in house if I need long term care? R.C. Wales
Alex Pegley: If your son is disabled and qualifies as your live-in-carer prior to your needing to move into a care home, then it is likely your home will disregarded as capital. If this is not the case, the main options available to you will either be to enter a deferred payment arrangement with your local authority – whereby the local authority will pay your care fees, to be met from the eventual sale of the property (this is not a long term solution as they require payment of the debt 56 days after your death). Alternatively, ownership of the property could be transferred to Mark in advance of your needing residential care. If this is well in advance it is unlikely the property will be deemed to form part of your Notional Capital (ie your assets for means-testing purposes).
I am the executor of my aunt’s will – she is 68 years old. She owns her house outright, it has a present value of approx. £180,000, with her husband. I have two cousins living with her, both are in their late 30's and disabled. One is on full time benefits the other works 16 hours a week in Marks and Spencer and has done for the last 20 years. My aunt is a full time carer.
Our family as a whole, including my aunt and her husband wish for my cousins to stay in the house together after the death of my aunt and uncle. The will they have made simply states that on the death of one parent one child inherits half the house and on the death of the other, the other child gets the remaining half.My aunt is very scared as she has heard horror stories in the vein of the house will be sold from under them if it is deemed that they cannot afford to pay for home help themselves, which is a given that they will need. That the sisters could potentially be split up and put into separate homes.So my question is this please: Where or what or to who should/could my aunt go to to ensure that she knows all the options that are open to her to prepare for the care of her children on the event of her death. I'm sorry if my question is vague - but my aunt feels lost and unsupported. She is scared that her children will be put into care and separated. If you could please advise. J.R. London
Irene Borland: Your aunt should approach her Local Authority Social Services Dept. and ask what level of care they would be able to provide if your cousins were left on their own. In assessing a person’s ability to pay for care in their own home the local authority are not able to take their property into account. Similarly if your aunt and uncle had to move out of the house into a care home it would be disregarded as capital from the means test as long as their children, because they are disabled relatives, continue to live there.
Local authorities are being encouraged by the Government to provide care in the person’s own home wherever possible but there is no guarantee that this will continue however much care is needed.
If care beyond that provided by the local authority is needed it may be possible to raise funds against the value of the property and purchase this privately. Advice should be taken at the time about any effect this may have on means-tested benefits or local authority support. Visit the NHFA website and download infosheet 2 ‘Treatment of Property’
I am 54 and my husband is 58 and we have around 6 years of mortgage to pay, and he has slight/moderate heart problem. In case either need care in the future, would we be better off staying put or downsizing to release some cash or would we be better to sell and move into rented and invest the capital? If we stay, we have little or no company pension and virtually no savings - would care fees be paid and would our house be taken into consideration? K.H. Yorkshire
Irene Borland: Under current legislation the local authority would have to disregard the marital home for the purposes as assessing a resident’s ability to fund their care as long as the partner of the person needing care was living in it. Therefore, if only one of you required care the value of your property, even if held jointly, would be disregarded.
However, if the property is sold and the money invested in order to supplement potential retirement income then the capital investment could be taken into account in the future if care were needed. Obviously, if only one of you were to require care in the future then only 50% of joint investments would be taken into account, but money/investments held solely in the care home resident’s name would be fully included in the financial assessment by the local authority. Currently investments held in some investment bonds which include an element of life insurance are disregarded from the means test for care as long as the investment was not made to avoid paying for it.
If you were to consider downsizing at the time you retire in order to free up equity to fund your retirement you would need to take independent financial advice at that time in order to be aware of any impact upon means-tested benefit entitlement or council support should you need care at home.
I am now a widow and thinking of moving nearer my daughter - if I sold my house and pooled resources with her so that she could buy a bigger house - what would happen if I had to go into care? Could I still keep a proportion of the new house in my name? A.L. Kent
Irene Borland: If you were to sell your current property and purchase a property jointly with your daughter the local authority could take your "beneficial" interest into account if you were later to require residential care and the title were to show that you had a beneficial interest in the property. However CRAG (Charging for Residential Care Guide), as guidance to councils, states: "The value of that interest will be heavily influenced by the possibility of a market amongst his or her fellow beneficiaries. If no other relative is willing to buy the resident’s interest, it is highly unlikely that any "outsider" would be willing to buy into the property unless the financial advantages far outweighed the risks and limitations involved. The value of the interest, even to a willing buyer, could in such circumstances effectively be nil." There is however no guarantee that the local authority would take this stance.
If your interest in the new property were not to be reflected in the title then the local authority could consider that you had deliberately deprived yourself of the capital value of your previous home i.e. made a gift to your daughter. However, again CRAG states that the local authority must consider timing and intention when considering whether deprivation has occurred. If it was considered the gift had been made to avoid the means-rest for care then they could treat you as if you still owned the capital.
An equity-release scheme could be a way to fund long-term care, although I appreciate this area is as yet un-regulated.Would the debt created against the property reduce the eventual value of the estate and therefore save, potentially, on Inheritance Tax? Thank you. S.B Hampshire
Irene Borland: Equity Release is a broad term and covers various means of raising capital against a property. Currently Lifetime Mortgages are regulated by the FSA, whilst Reversion Schemes are not, but will be in the near future.
If you required care in your own home then the property would be disregarded in any means test for care. If you were to require care in a care home then it is unlikely that any equity release provider would allow you to have a scheme on a property you are not occupying. In answer to your Inheritance Tax question, yes, any debt against the property would reduce the value of your Estate and therefore could potentially reduce any IHT liability. You should also remember that releasing capital ,depending on your other savings ad income could also impact on means-tested benefit entitlement or council support.
My father in law dropped dead suddenly in March. His wife, who already suffered from Altzheimers, was unable to handle the shock and required immediate admission to a home. W Sussex CC were most helpful and we found a good home, where Mother in Law is well looked after to this day. It was agreed with the care team that she would be admitted under the 3 month disregard rule and thereafter we would pay for her care ourselves as she has savings of more than £21,000. Having agreed that, I have had intermittent hassle from W Sussex Finance, which first started only 4 days after the death and before the funeral. In overtly threatening language, they have wanted to see the deeds of Mother in Law's house, threatening financial investigations and being generally unpleasant. At the end of the 3 month disregard, I took all responsibility for financing her care, and the Council Care Dept wrote a nice letter wishing us well and pleging to keep in touch on the care side. They have been as good as their word. Now to my surprise, the Finance Department have started up again and have sent me a huge bill to pay for the 3 month disregard period, which is also greater than the sum that the care home received from the Council. I had believed that the 3 month disregard was Mother in Law's right in view of the obvious emergency. W Sussex Care agrees but Finance are intent on payment. Where do I stand? M.F. Emsworth
Jonathan Ellis: You are well within your rights! The value of your mother in law’s home should have been disregarded for the first three months. After that, and only then, should the value of her home be counted as capital and count towards the cost of her care.
What is the importance of gaining long term power of attorney before an elderly relative becomes ill? W.D. Tadcaster
Jonathan Ellis: When someone becomes incapable of managing their affairs in the future, it can be a very difficult time, both for them and their family and friends. From both a practical and financial point of view, it makes sense to consider appointing an attorney under an enduring power before that day arrives.
There are occasions when the lack of an Enduring Power of Attorney (EPA) can cause untold distress and create problems which could easily have been avoided. For example, you may have had a stroke and been advised that you cannot return home to live on your own any more. A nursing home may have been suggested as the best solution. Unfortunately, your family will have great difficulty in selling your house if you are unable to give the necessary instructions for sale and eventually sign the contract. If an EPA exists, then the attorney can sign on your behalf, thus ensuring that your problems are dealt with promptly.
I jointly own a house with a friend - no relationship, it has been suggested that if one of us need care it could be costed against the whole value of the house. Is this true? M.C. London
Jonathan Ellis: Property value is only disregarded if someone is over 60 and a relative. Therefore, 50% of the property value (or whatever your share comprises) will be taken into account I'm afraid . However, that value, as assessed by the local authority, would be heavily influenced by your ability to sell that share. It could therefore be given a 'nil valuation' and would not be taken into account until the property is sold. After all, not many people would want to buy half a house with a stranger. However, you may be forced to argue this case with the Local Authority . And even if you are successful, the LA is likely to place a caution against the property, so that if it were to come to the market in the future, they would attempt to recover their costs.
It is imperative that people seek specialist advice before attempting to negotiate the confusing and complex system of care funding. The Care Fees Advice Service from Help the Aged provides face-to-face advice to anyone, entering or already in care, regardless of means, and combines specialist financial advice with information on the many associated issues, such as local authority charging procedures, health authority responsibilities, benefits and legal matters.
All advice offered here is of a general nature and is intended for guidance only. It is offered without any legal responsibility. You should always consult your own professional advisers on your specific requirements.
