Will I have to pay my own care home fees?
Many people worry about how they’ll pay for a care home, either for themselves or a loved one.
With headline-grabbing stories about people having to sell their homes or being left with no savings after they’ve covered the costs, it pays to be clued up on the facts.
Separating fact from fiction
If you or a loved one need care, your local authority will carry out a needs assessment. This will determine the type of care required and include a financial assessment, which calculates how much you need to contribute to your care home fees.
Your income and capital, such as savings and property, will be taken into account, but to what extent will depend on your personal circumstances.
The most important figure you need to be aware of is the upper threshold of £23,250. If you have capital above this amount, you won’t get any help from the state, unless you have a condition which primarily needs nursing rather than social care, and which may give rise to funding support from the NHS.
If you have less than £14,250, your financial situation is fully disregarded.
Between these two thresholds, you will be required to make a contribution towards your care based on your capital amount.
If you have joint assets such as a joint bank account, these are treated as being owned equally, meaning the local authority will assume each saver owns an equal amount.
For example, if you and your spouse have £10,000 in a joint bank account and your husband deposited more than you (say £7,000 vs £3,000) and you are going into a care home, you will be assessed on the basis of each having £5,000 – half the balance.
“It may therefore be worth holding funds separately,” says Bill Calderbank, director of Later Life Asset Management.
Unlike joint savings, jointly owned property can be disregarded from the financial assessment if the house is occupied by the partner of the person who is going into care or by a relative aged 60 or over. The local authority can also make a discretionary exemption if a long-term carer lives in the property.
If your property is included in your assessment, the full value of your share will be assessed by the local authority.
For homeowners who are tenants in common, the local authority can only recoup costs from the share of the person who receives the care.
Couples often own their property jointly and have mirror wills leaving everything to each other. If a care need arises after the first death, this can have the effect of concentrating wealth in the hands of the survivor meaning that more is available for assessment.
As an alternative, Calderbank says a change of ownership to tenants in common, and a will which leaves a property share to a member of the family, can reduce the amount of capital which might potentially be assessed.
Gifting your assets
There are certain ways to reduce an inheritance tax bill (IHT) upon death, such as gifting money, however, when it comes to care home fees and trying to reduce your assets, exemptions such as the seven year rule may not apply. (Under the ‘Potentially Exempt Transfer’ rule, capital can be gifted to an individual and no IHT is payable provided the donor lives seven years).
Age UK explains that if you give away assets or dispose of them in order to put yourself into a better position to obtain local authority help with care home fees, you may be assessed as if you still have the assets. This is called the deliberate deprivation of assets.
Calderbank says that if the local authority suspects deliberate deprivation, it can investigate transfers over a longer period of time.
He says: “If a person has a stroke at 70, recovers and then decides to transfer his property or assets to their children, the transaction may be scrutinised if they subsequently seek assistance from the local authority who may seek to argue that the gift was made because of the medical position. This can be devastating for individuals as they may not be able to get the assets back.”
Age UK adds: “In terms of the law, it is the reason why someone gives the money away that is important. Local authorities might consider factors such as the person’s normal pattern of spending and whether the person could foresee they would need care in the future.”
How to plan for a care home stay
Calderbank says there’s an understandable reluctance about planning for the future, especially when it comes to the need of a care home. As a result, some may panic when a need does arise and may be inclined to make gifts out of fear.
“I would say it makes sense to start planning when you draw your pension. Understanding how the system works and is likely to apply in individual circumstances is key and advisers who are members of the Society of Later Life Advisers (SOLLA) are skilled to advise,” he says.
“For those who have developed a need for assistance, Attendance Allowance is a benefit which is often overlooked. Many think it’s means-tested but it’s not. With current rates of £55.10 and £82.30 a week this can be vital in helping to pay for help that may be required.”
Attendance Allowance is paid to help with personal care if someone’s physically or mentally disabled and they’re aged 65 or over. The rate you’ll get depends on the level of care you need because of your disability.