It is now very much a fact of life that if you live long enough you will, at some point in your life, be faced with the prospect of needing care and you may have to consider moving to a specialist residential care or nursing home. This raises the question of who pays and the short answer is, if you have enough assets, then you are expected to foot the bill.
Types of care
In broad terms, there are two main types of care – residential care and residential care with nursing – the latter being where your health needs determine that you need additional support or assistance. In both cases the cost of care is not cheap. Figures from industry experts, Laing & Buisson, show that the cost of residential care is cheapest in the North West where it averages around £511 per week, rising to an average of £741 per week if you live in London. The cost of residential care with nursing is, on average, cheapest in the North East of the country, at £666 per week rising to a whopping £1,041 on average if you live in the South East.
With care fees like these, any assets that you have can rapidly be diminished if you have to pay them yourself, a scenario that has left many people considering how best they can ‘offload’ assets to their dependants to avoid them being swallowed up by these huge fees. However, if you are considering this approach, you need to be very careful, as there are strict rules and guidelines about what you can and can’t give away.
Let’s start with the basics
The threshold at which you have to pay your care fees differs depending on where you live. At present, the thresholds are as follows:
- £23,250 in England and Northern Ireland
- £26,250 in Scotland
- £30,000 in Wales
Basically, this means that if you have assets in excess of the threshold figure, you are expected to pay, and continue to do so, until your assets fall below the threshold figure. If you are a homeowner and need care you will, without question, be expected to pay for it yourself.
I’m not paying!
Unfortunately, that’s not an option. Should you need care then the first thing that will happen is that your Local Authority will undertake a care assessment. This not only aims to determine the type of care that you need, but also looks into your financial situation to determine whether you should pay for your care, or whether your Local Authority will pick up the bill.
As part of the financial assessment, your Local Authority will ask about previously owned assets, as well as those currently owned. They are effectively trying to determine whether you have ‘gifted’ assets to deliberately avoid having to pay your own care fees – this is known as ‘deliberate deprivation of assets’. Some examples of this are:
- Selling an asset, such as a property or a valuable painting, to a friend or relative for less than its true worth.
- Gifting property by transferring it into someone else’s name.
- Gifting money to your dependants.
- Suddenly going on extravagant, or expensive holidays with a view to diminishing your capital reserves.
And rest assured, if they find any evidence of attempts to transfer assets to avoid paying care fees, then they will scrutinise the transactions very carefully indeed.
What can I do?
Good financial planning is the key to asset retention. Should you have significant assets, then it is essential that you take the right advice as soon as possible. If your intention in transferring assets is to tidy up your financial affairs, and if it is done on the back of sound financial advice from a specialist financial advisor, then it is unlikely that any Local Authority could consider this a deprivation of assets and look to challenge the action taken. This is especially true if, at the time you made the arrangements, you had no need for care or no knowledge that you would need care in the immediate future.
When is it likely to be challenged?
Transfers of assets are more likely to be challenged if a Local Authority feel that the main motivation for the transfer was to avoid paying care fees. Likewise, expect a challenge if the person making the transfer needs care shortly after it has been made; if the asset given away had significant value or if the transfer has diminished the value of a person’s assets significantly.
If the Local Authority successfully argues that deprivation of assets to avoid paying care fees has taken place, then they will seek to have the value of these assets included in the overall financial assessment, even though they are no longer owned by the person seeking care. They can then look to recover the cost of any care fees from the person to whom these assets have been transferred.
Whilst the thought of paying for your own care may be unpalatable to you, it may also be unavoidable. Whatever you do, take appropriate advice at all stages and make sure that you do things correctly – if you don’t, it might just catch up with you at a later date!