There has been much talk in the press recently about older people selling their homes to pay for care. It’s not a new story – in fact it’s one that regularly does the rounds.
But each fresh headline strikes fear into the hearts of those facing the prospect of going into care. After all, the typical cost is £27,000 a year for residential care – rising to over £35,000* if nursing care is needed. How will they be able to afford it? What happens if they sell all their assets and still find themselves running out of cash some years down the line? Will they have anything left to pass on to the next generation?
So far, so depressing… but if we look at all the facts, not all of it is bad news.
Firstly, to be a “self-funder” you must have over £23,250 in capital (savings, investments and property – including the value of your home if you are going into residential care). That said, if someone else shares your home (for instance, a partner, close relative aged 60 or over or someone who is incapacitated) your home won’t count as capital.
However, if you DO have a partner it can get complicated determining which assets belong to whom, and here expert advice will be needed.
Regardless of the value of your home, then, you may still qualify for local authority funding. That said, of course, your local authority will apply given budgets on what they are prepared to pay – potentially limiting your choice of residences. If you are unhappy with the home or homes offered, there is always the possibility of a third party (not you) topping up the fees at a more expensive care home of your choice.
It’s well worth remembering, however, that if there is no suitable care home available that meets the client’s needs at the rate which the council would normally pay, the council is required to make alternative arrangements with no requirement for a top-up contribution.
You may also qualify for other forms of assistance. For instance, for the first 12 weeks after you move into a residential or nursing home your house will not be counted as an asset if you have under £23,250 in capital. For those assessed as having a “primary health need” – that is, a complex medical condition and substantial and ongoing care needs – NHS continuing healthcare may be available.
Other benefits to which you may be entitled include Attendance Allowance and NHS funded Nursing Care Contribution (both of which are non means-tested).
But, for many, the reality will involve an undetermined length of time paying out significant amounts of money. So how can you fund your care and still retain as many of your assets as possible?
By planning ahead, and employing expert legal and financial advice, it may be feasible to protect some of your assets – for instance by creating a Trust, or even giving them away.
A big word of caution here, though: gifts made within seven years of your death will still qualify for a level of Inheritance Tax; and, if you are deemed to have squirreled or given away assets specifically with the intention of avoiding care home fees, you may still find yourself liable.
Your local authority may consider this to be an “intentional deprivation of assets” and will include these sums in your financial assessment – even if you no longer own them. The closer such gifts are made ahead of you going into care, the more likely it is that objections will be raised. Once again, expert, specialist advice is critical.
Other options include keeping your home and renting it out. This provides a regular source of income (possibly with a better return than conventional savings), retains the asset within the family, and avoids the need to sell the home hurriedly – possibly at a disadvantageous price (or, indeed, finding that you cannot sell it at all).
Local authorities also offer a ‘deferred payment agreement’: they fund your future care and then recover those costs after your death from the sale of the house. You should seek specialist advice before entering any agreement to ensure that this really is appropriate to your personal circumstances.
Another option to consider is a care fee plan to cover all or part of future fees: for a fixed lump sum you are guaranteed a certain amount paid towards the cost of your care for the rest of your life.
How large that lump sum will be depends upon how much you seek to receive each month, and also your age and state of health. Your insurer is (to be blunt) taking a calculated risk on your life expectancy… and so of course are you! The advantage to you and your family is having a known, fixed cost for your future care – with the added reassurance that, whatever happens, you will never run out of funds.
PayingForCare is a national service for those who are faced with paying the cost of their long term care. Our impartial and free-to-use service helps older people, their friends, families and carers access the financial information and advice they need to make informed choices.
We work closely with care providers, local authorities, government departments, charities, health services, support organisations and other experts in the care sector to address this complex subject and ensure financial information and advice is readily available.
Click here for further help and information.
* Laing & Buisson 2013