All Your Care Fees Questions Answered.
When advising Clients as to later life legal planning, we find that they often have questions regarding Care Fees, and losing their home to pay for them, if care is required.
It is perfectly reasonable to take advice as to your position regarding care fees. In our experience, those fears are often unfounded. There are regularly stories in the media, declaring that somebody has lost their home to care fees, which understandably creates worry for some people. We have provided this resource to offer background as to how decisions are taken if it is believed you will need residential care in the future, what is included and disregarded in such an assessment, and how those payments are made.
Knowing how the care financial assessment process works often puts Client's minds at rest. After all, the odds of not requiring long term residential care in the future are in your favour!
We think this general resource will offer you a well referenced insight in to this area.
Do I have to sell my home to pay for care?
The answer to that question could be 'no', 'yes' or 'not during your lifetime, and that of certain relatives'. Your ability to pay for care will be worked out through a means test. Your home will not be included if you are arranging care and support at home and may not be included if you live with a partner, child, or a relative who is disabled or over the age of 60.
For more information as to what is disregarded and why, see here.
Currently, if your capital and income is above £23,250 you’re likely to have to pay your care fees. If your capital and income is under £23,250 you might get some help from the local council, but you may still need to contribute towards the fees.
What are the chances of needing care?
The Institute & Faculty of Actuaries states that a significant proportion of the population are likely to need to find the means to fund their care needs in later life. In England, there is, approximately, a 35 per cent chance of a 65 year old female, and 25 per cent chance of a 65 year old male, having substantial care needs at some point in their life.
Therefore, you could argue that the news is positive, in that there is a low chance that you will ever require long term residential care, and have to pay for the same.
Can I avoid paying for care?
No. The rules as to deliberately depriving a local authority of your assets so that you do not have to fund your care are clear. In a case of deliberate deprivation, the value of the assets that have been deprived will be written back in to a means assessment, and the person who now has those assets can be made to pay.
If I put my home in to a Trust, is that deliberate deprivation of assets?
It depends on the reasons that you put your home in to a trust. In assessing whether you would deliberately deprive a local authority by putting your home in to a trust, you should consider the following:
Your intention to avoid your care charges must be a significant factor, or the only reason, you have transferred an asset elsewhere, in order to be found to have deprived yourself. Your local authority must prove this if they intend to take a transferred asset into account.
The guidance confirms it is unreasonable to decide you have disposed of an asset to reduce the level of care charges payable if, at the time of the disposal, you were fit and healthy and could not have foreseen a need for care and support.
A local authority must take in to account:
-whether avoiding care and support charges was a significant motivation for you when you disposed of the asset
-the timing of the disposal. When the asset was disposed of, could you have a reasonable expectation of the need for care and support?
- did you have a reasonable expectation of needing to contribute to the cost of your eligible care needs?
So the answer very much depends on timing and intention. If at the time you dispose of an asset (here, we're considering trusts) you are fit and healthy, had no reason to expect the need for care in the future, and do not undertake planning with a sole or significant intention to deprive a local authority should you need care, then the use of a trust in estate planning is perfectly reasonable.
It is important that we make Clients aware of the rules regarding deliberate deprivation when undertaking estate planning. In some circumstances it is a relevant consideration, but certainly not all.
Please also review our guidance on deliberate deprivation.
There are lots of reasons client's choose to use a trust as part of their estate planning. These include:
-Wills can be changed, even up to 2 years after death. Trusts cannot in the same way;
-Trusts can be more difficult to challenge than Wills;
-Estates can be lost to children through unexpected second marriages of widows;
-If you lose capacity to deal with your own affairs, the trustees of your trust can manage your home and ensure proper provision is made for you;
-Properly constituted trust assets do not pass through probate. This can offer considerable savings on the cost of obtaining probate, which the Which? website states as being between 2-4% of the value of the assets;
-Some trusts can save your children from being pushed in to paying Inheritance Tax on their estates;
The time it takes for your beneficiaries to inherit your property can be heavily reduced - often beneficiaries will inherit instantly (don't forget, no need for probate, they can simply sell your house if they choose).