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1. How can I protect my assets from having to be used to pay for my care?
2. Will the Local Authority Fund my care?
3. What benefits are available to help with my care?
4. What options are available to pay for my care?
5. What if my home is the main asset to pay for my care?
6. How Does a Care Fees Annuity work?
7. What if my partner needs to move into care?
If you are at the point where you are now in need of care, there is little you can do to exclude any assets from the Local Authority’s calculation.
If you have assets of over £23,250 (including the value of your home) you will be expected to make use of all of the assets above this limit before the Local Authority will consider paying any of your care fees.
You should however ensure that you are claiming all the benefits to which you are entitled, which will slow down the use of your own assets (see question 3 below).
Also, your home will be excluded from the calculation if a surviving spouse or partner lives there. This exclusion also applies if other relatives aged 60 or over are still living in the property.
Assets cannot just be given away to keep them out of the calculation for paying care fees. The Local Authority will deem that you still own any assets given to your children etc, and there is no time limit on when the gifts were made.
For those with time to plan ahead before care is needed, the following factors should be considered, to ensure that your assets are positioned in the best possible way:
- Keep your savings separate. Local Authorities do not have the right to use the assets of a spouse to fund their partner’s care fees. To ensure that specific investments or savings are disregarded, you should avoid the use of joint accounts etc.
- Consider changing the ownership of your property to ‘Tenants in Common’. Most couples own their property on a ‘Joint Tenants’ basis. This means that on first death, the surviving partner automatically owns the whole of the property – making it impossible for any of the value to be excluded if you subsequently move into care.
On a ‘Tenants in Common’ basis, each person is able to specify who receives the share of their property on their death (e.g. their children or into a Trust). This will often mean that the surviving partner’s share of the property is disregarded as an available asset for funding care.
Your local solicitor will be able to advise you on switching to this basis.
- Inheritance Tax (IHT) Planning. Provided there is a valid financial reason for giving away some of your capital (rather than just to avoid this being used for your care) this will usually be disregarded from your assets. Prudent IHT planning will usually be regarded as a legitimate use of your funds. The following gifts can be made free of any current or future IHT liability, and would therefore be regarding as reasonable planning:
- Wedding Gifts. Up to £5,000 to each of your children, £2,500 to each grandchild, and £1,000 to anyone else.
- Annual Exemption. You can give away £3,000 in each tax year.
- Small Gifts exemption. Gifts of up to £250 each, to any number of people each year (including gifts to charities, the National Trust, national museums, the main political parties etc).
Please note, however, that if you rely on the Local Authority to fund your care, the choice of where you receive that care will be restricted to a home of their choosing.
The Local Authority will carry out a care needs assessment to identify the level of care required. If a need for care is identified, the Local Authority then has a duty to provide for your needs. You can make an appeal if you feel that your needs have not been accurately assessed.
However, when it comes to paying for care, the Local Authority will only consider paying for those who have assets (including your home) of less than £23,250. If you pass the ‘asset test’ you will still be expected to contribute a part any regular income you receive, towards the cost of your care.
If the Local Authority pay for part or all of your care, the place where you receive that care will be restricted to a home of their choice. Their duty of care extends only to the requirement that the home are able to provide the level of care identified for your needs.
You can choose a home in a different location, or which provides a higher level of social facilities etc, but this would have to be in line with the Local Authority’s payment limit, unless a family member is able to make a ‘third party top-up’ to cover the difference in cost.
If you are paying for your care (either in your own home or in a Care Home) you can apply to the Local Authority for payment of ‘Attendance Allowance’. This is paid at two levels, and is tax-free.
If you are assessed as needing care during the day only, or during the night only, you will be paid the lower rate of £49.30 per week. If you need 24 hour care, you will be paid the higher rate of £73.60 per week.
If your care needs are predominately medical, and you are receiving care in a Nursing Home, you may also qualify for NHS funded ‘continuing care’. Basically, the more medical conditions you have, and the greater their complexity, the more chance you have of qualifying for this payment. There is one level of payment of £108.70 per week, if you qualify.
If you need to pay for your own care, there are a number of methods you can use.
Moving into permanent residential or nursing care, means that the care fees you pay will usually cover all your living costs (Food, Electricity, Council Tax etc) as well as your care needs, so most of your income can be used towards payment of your care fees.
The remaining shortfall between the care fees and your income, will then need to be covered by making use of any savings and investments, or from the sale of your property. You could choice any of the following methods to cover this shortfall:
- Using the income generated from savings/investments
- Using the capital from savings/investments
- Purchasing a special Care Fees Annuity (see question 6)
The most suitable method will depend on your specific financial circumstances, but for a number of people, the purchase of a Care Fees Annuity has a number of advantages:
- Peace of mind, that the benefit is guaranteed to be payable for life, effectively putting a ceiling on the costs, rather than paying from capital on an open-ended basis.
- Because the benefit is paid directly to a registered Care Provider, this will be completely tax free and will not affect any allowances being received
- An escalation option can be included, to offset future increases in care fees.
- The premium is calculated on the specific health details of the person needing care, rather than just based on a general rate for their age group. This will generally mean that a lower premium would apply, compared to an annuity for a person in full health.
- Where the total assets exceed the Inheritance Tax (IHT) limit, making a payment to a Care Fees Annuity will immediately reduce the level of assets liable to IHT, leading to a potentially significant saving in Tax.
If your assets, excluding your home, are less than £23,250 you can approach the Local Authority for some initial assistance in paying your care fees.
- If your income alone will not cover the cost of your care, the Local Authority will make a contribution towards the cost for the first 12 weeks, which will not have to be repaid to them.
- At the end of the 12 week period, if your property has still not been sold, the Local Authority may be prepared to pay your care fees, as a loan. A charge to cover the loan will be placed against your property, and the loan (and any interest charged) will need to be repaid to the Local Authority once the property is sold, or within 56 days of your death.
- Please note that the continued loan facility, after the initial 12 week period, is only available at the discretion of each Local Authority, in accordance with their budgets etc.
Alternatively, there are also some companies who provide an ‘Assisted Move’ service. In addition to managing the sale of your property, they also offer facilities to enable you to move into care without the need to wait for the property to be sold. These include:
- A ‘bridging loan’ (which sometimes includes an interest-free period).
- A monthly advance, to pay the initial care fees.
- An ‘immediate sale’ facility, for up to 90% of the property value.
Further details of these facilities can be obtained by contacting Care Fees Investment Ltd on 0845 077 5655 or by email to firstname.lastname@example.org
The annuity (commonly known as a ‘Care Fees Payment Plan’ or ‘Immediate Needs Annuity’) is purchased by making a one-off payment (a ‘Single Premium’) to an insurance company, who will then make monthly payments to your care provider, for the rest of your life.
Once in place the annuity can be transferred between care homes, and if your care needs change in the future, an additional annuity can be purchased at that time, to cover any significant increase in fees.
The annuity can include a regular increase each year, to offset any annual increases applied by the care home, and the Single Premium can also be protected to provide the option of some of the premium being returned if death occurs in the early years of the policy.
You should consult a specialist Care Fees Adviser, to help you choose the most suitable option for your circumstances.
Care Fees Investment Ltd have 10 years specialist experience, and will provide you with clear and practical advice regarding the financial aspects of Care Fees planning, to help you through what they appreciate to be a stressful and difficult time. Furthermore, the initial work they undertake in providing you with their advice is free, and without any obligation on your part.
Further information is available on their website, or you can call them on 0845 077 5655.
If one of a couple needs to enter a care home, the Local Authority will view any jointly owned assets as being owned in equal shares, in their calculation to determine whether they should be contributing to the care fees. The local authority will only consider making a contribution to the care fees if the person’s assets are less than £23,250.
If you will be continuing to live in the property after your partner moves into care, then this will be excluded from the means-test calculation.
Additionally, the Local Authority are not permitted to use any of the assets owned solely by you, in your partner’s means-test calculation.
Private & Occupational Pensions. Often, one of a couple will be receiving a higher level of income than the other, as a result of private or occupational pensions being received. If the person with the higher income is the one moving into care, it is possible for 50% of their pension to be transferred back to the partner remaining at home, if they would otherwise suffer financial hardship. Any pension transferred back, will be excluded from the means-test calculation of the person needing care.
This exclusion only applies to married couples, or to couples in a Civil Partnership.
Pension Credit Rules. When one of a couple moves into care, the Pensions Service must then treat you separately to determine whether your available individual assets and income qualify you to receive the personal level of Pension Credit.
Moving from a jointly owned property. If the partner living at home wishes to move to a smaller property, half of any capital proceeds realised as a result of the sale will then be regarded as the assets of the person in care, and included in their means-test calculation.
It is not possible for any of this share to be given away to children etc, to avoid this being included in the Local Authority calculation.
Using the property to fund care fees. If the person moving into care has limited assets of their own, and you would prefer their care to be at a home with fees higher than the Local Authority funding level, you could consider an Equity Release scheme.
These schemes will enable you to release some of the equity from your property, in return for giving up a share of it’s value, which can then be used to help fund your Partner’s care fees.
There are, however, different types of schemes available, with different methods of repaying the loan, and the circumstances and costs involved need to be carefully considered by a qualified Financial Adviser, to ensure that you select the best basis for your needs.
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