Many people worry that their local authority could take all their wealth, including investments, cash deposits and home, to pay the costs of funding their long term care.

The Government has made a promise to ease the burden by paying some of these costs, following recommendations by the Royal Commission. This will typically be costs directly relating to nursing care but the individual will still be held responsible for the costs relating to the residential and personal care costs.

It’s hardly surprising why people are concerned when the expense can be as much as £20,000 to £35,000 each year - a great deal of money that could rapidly wipe out a person’s life savings.

So how many people are affected?

Over the whole of the UK, approximately 500,000 people currently live in Residential Care and approximately 70,000 homes a year are sold for this funding purpose. The Community Care Act 1990 provides the structure to allow the local council to seize the family home, put it up for sale and use the proceeds to support long term care costs.

There are, though, restrictions, which are allowable by law and process.

For instance, by completing certain Inheritance Tax planning procedures and splitting the ownership of assets of a personal estate between a husband and wife, the local authority will potentially have access to the assets only of the individual who needs care. This may equate to only half the assets.

Furthermore, certain assets may be disregarded in the assessment for long term care costs. These are detailed in the “Charging for Residential Accommodation Guidance” (CRAG).

This guide is issued under the auspices of the Local Authority Social Services Act 1970 and most local authorities will follow the contents of this guide. It is specific to the area of Investment Bonds; these are detailed as “disregarded” in the assessment for costs under specific terms.

That said, care must be taken as local authorities do have the right to assess the actions taken by an individual under the ruling of “deprivation”. They can then challenge the transfer of assets if it can be shown that an individual was aware of the likelihood of the need for care and took action to reduce or avoid long term care costs by transferring assets away.

Of course, if actions were taken for other reasons, this would strengthen an alternative argument. For example; a client restructures their estate for the purposes of Inheritance Tax mitigation; including implementing suitable Investment Bonds when there is no immediate prospect of going into care.

It is typical (and usual) that if you arrange your estate to mitigate Inheritance Tax in advance of any expected need of going into long term care, the local authority will typically not try to seize associated assets under the correct circumstances.

Please be aware that the details above are general, and each personal situation must be assessed on its own merits.

I would always advocate specialist, expert, objective advice is sought and received on this subject before taking any action - or, indeed, deciding not to act!