Seek advice to alleviate care home fee concerns
Plan for the future based on rules, not assumptions, writes Magnus Mackay
Most people approaching later-life carry a version of the same anxiety: that if they go into a care home then the council will take their house, spend their savings, and leave nothing for the family. That fear is understandable and commonplace, but the reality is not always as bad as it seems. Statistically, only around 2.5 per cent of those over 65 need residential care, with average length of stay being approximately two years. Planning matters, but it should be based on rules and not assumptions.
Generally, if someone is unable to live independently, a local authority (or in some cases, the NHS directly) will assess their needs and their ability to pay for it.
In Scotland, anyone with capital assets (like savings, property, investments) valued at £36,750 or more is classed as self-funding and liable for costs in full, subject to the so-called “free personal care” contribution, which is not means-tested. For those assessed as having capital below £22,750, the local authority is responsible for meeting the cost of care and those with capital in between will pay a reduced amount. Pensions, investments and rental incomes are also taken into account, to calculate a weekly contribution payable by the resident.
Many people think giving their house to their children will solve the problem. It is unlikely to do so. The regulations prohibit what is known as a “deliberate deprivation of capital”. Where an authority can prove that avoiding care costs was a significant reason behind a transfer, it can effectively ignore it. The “six-month rule” is also misunderstood. There is no time limit beyond which an authority cannot ask questions, but if residential care is needed within six months of a transfer, bills can be sent to the individual who is given the house. They will then be liable up to the value of the property received.
There are other risks in giving assets away. Recipients could run into financial difficulties and end up being forced to sell to pay their debts. They could die unexpectedly and their heirs might not be so supportive of the elderly parent or grandparent. Marital breakdown could also force a sale.
Confusion runs in both directions. Statutory exemptions, known as disregards, can be used to exclude a property from a means test where certain criteria are met. Examples include where a spouse or civil partner continues to live in the house as their main home, or where a child or a relative aged over 60 resides in it. These protections are routinely missed because families do not take advice early enough.
It should be remembered that private care homes operate differently, typically requiring prospective residents to demonstrate they can self-fund for approximately three years. Where a property is kept and ultimately sold, the resulting funds can open up more choice of care provider. This should not be overlooked.
On a more positive note, married or cohabiting couples have opportunities for planning and this should be explored further with a Solicitor.
Financial planning can also play an active role, potentially allowing the family to draw upon other resources to help meet costs without having to think about the house.
Ultimately, the right answer depends on individual circumstances. A solicitor with expertise in later-life planning, working alongside an independent financial adviser, will map the options and help families make decisions they will not later regret.
Magnus Mackay is a Private Client Partner, Thorntons