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Care in Old Age        

It is now a fact that people in the UK are living much longer than they used to. With this increasing longevity comes a corresponding increase in demand for care in old age. In the UK, the cost of a basic residential care home is £25,000 per year, or just over 3 times the average mortgage. Nursing care is even more expensive at £35,000 per year. These are average figures and they may vary between regions.

  Who pays for this?

The type of care required will determine the assessment procedure and, ultimately, who will pay for the care package agreed. A community care assessment is carried out to determine the needs of an individual, and to identify the services required to meet those needs. As part of this assessment, the person requiring care will be means tested. Part of the assessment determines what element of your care is nursing care, which should by funded by the NHS. These limits are set by each local authority. Each authority has their own assessment procedure.

  Means test

At present, the upper limit is £23,000 and the lower limit £14,000.

If the value of your estate is between the two, you will contribute £1 per week for every £250 you have over the £14,000 threshold, and the Local Authority is obliged to fund the rest.

If the value of your estate is above £23,000, you are considered to be self-funding and will contribute the full amount of your care. In this case, a person who is self-funding is entitled to claim free nursing care, and the Primary Care Trust (PCT) will pay this directly to the home.

If the value of your estate is below £14,000 the Local Authority is obliged to fund the full cost of your care. In this case, if the person requiring care is receiving any income (pensions etc) it will be used towards the cost of care.

A word of caution. In cases where the Local Authority is contributing towards the cost of care, the standard of care received can be very basic and the choice of home extremely limited. Many elderly people would like to receive a better standard of care and accommodation than the Local Authority is prepared to provide. This is worth considering when transferring assets with a view to receiving assistance from the Local Authority.

  Means test exemptions
  1. The value of property will be disregarded if a spouse or relative over 60 years of age, and who is a dependant of the person requiring care, is living in the property.
  2. The value of property will be disregarded if a disabled person under 65 years of age, and who is a dependant of the person requiring care, is living in the property.
  3. The value of residential property is excluded for the first 12 weeks of care during the assessment period.
  4. A person in care may keep 50% of any private or Occupational Pension. The other 50% will go to the spouse or partner remaining at home.
  Jointly owned assets

Where assets are jointly owned, the Local Authority will split them equally. Any savings will be split 50-50 irrespective as to which spouse or partner has contributed the most over the years. Any accounts held in a sole name will count as being that person’s money, and will be taken into account in the means test.

This can be an important point to consider when assets are being transferred to the non-tax paying spouse or partner in order to maximise tax relief. Should that person then need care, the funds in their sole name will be taken into account in the means test. Any Occupational Pension being paid to the person going into care will also be split equally. As mentioned above, the person in care will receive one half of the pension and the spouse or partner remaining at home will receive the other half.

  Care planning options
  1. Transferring (gifting) property to a third party, eg children. This is a very risky option because of the possibility that child could become involved in divorce, bankruptcy, family fall outs,etc, or that child dying first. Any assets transferred to the child are considered to form part of that child’s own assets and are at risk in bankruptcy and divorce proceedings. In addition, these schemes do not come with any guarantee of success and may be challenged by the Local Authority.

  2. Placing property into Trust during your lifetime. This is a less risky option than 1 but it is expensive to set up and administer. The chosen assets are sheltered in a Discretionary Trust and dealt with by appointed Trustees. The asset is then owned by the Trust and not by the individual. The person transferring the asset can be a beneficiary and also act as Trustee. Not only is the asset beyond the reach of the Local Authority but the person making the transfer can continue to enjoy the asset.

  3. You can include a Protective Property Trust (PPT) in your Will if:
    • You do not wish to leave your share of the property to your spouse or partner.
    • You do not wish your share of the property to be used for the cost of care in old age.
    • Your survivor remarries and you do not wish your share of the property to go to that new spouse or partner.
    • Your survivor has additional children and you do not wish your share to be diluted before going to your children.
    • You would like to protect your share of the property from bankruptcy proceedings if your creditors try to get their money back.
As a guide, the scale of charges will be within the range £360 to £900 for most Protective Property Trusts, depending on complexity. For more information please ring Wincham Executor & Trustee Company Limited on 01260 299 700.

Note: If the transfer to a third party (individual or Trust) is made within 6 months of that person requiring care, it will be overturned by the Local Authority as a statutory right. Outside the 6 month period the Authority has no automatic right to overturn it but they can challenge the arrangement by proving the transfer was done for no other purpose than to put the asset beyond their reach. In reality this is not too difficult to prove as there is no time limit and transferring assets to an individual or Trust does not yield (inheritance) tax savings if that person continues to live in the property.

  Insolvency Act

This is a tactic used by Local Authorities to make the person (who has transferred the asset) bankrupt, arguing that the transfer was made to avoid it being used to pay that person’s debts, ie care fees. A Trustee is appointed and has the power to scrutinise all transfers made in the past and re-claim these on behalf of the creditor, ie the Local Authority. The longer the period of time between the transfer of the asset and care being needed the better. You should be considering a minimum of 5 years to make it as difficult as possible for the Local Authority to prove intent.

  Forward planning

Forward planning is essential when considering the subject of care in old age. Care insurances are available to provide an income and safeguard assets. Before deciding that transfer of assets is the right course of action to take, work out your income (from pensions, insurances and assets sold or invested) in the event that you do need care. If that income is close to or exceeds the cost of care then there is no good reason to be considering transferring assets. If you accept care will be needed at some point in the future, the earlier this planning process begins the better.

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©Wincham Executor & Trustee Company Limited 2019, Wincham House - Greenfield Farm Trading Estate
Congleton - Cheshire, England - CW12 4TR