With care home costs averaging £30,000 a year, this means that as well as ensuring you have a decent pension pot, it is vital to consider how you would fund residential care, should the need arise.
The law relating to care home funding changed in April 2015 with the implementation of the first phase of the Care Act 2014. The position now is that those with capital in excess of £23,250 will usually be expected to meet the full cost of accommodation and personal care in a residential home. The individual's home may be taken into account in assessing this figure. However, if a spouse or another close relative is living in the property then the value of the home may be disregarded.
Those with capital of less than £14,250 will not be expected to use this to pay care home fees, but they may be expected to contribute their income towards their care.
A local authority (LA) is obliged to offer a 'deferred payment agreement' (DPA) allowing the cost of an individual's care to be deferred until after their death, in the form of a charge against their property, where an individual has non-property wealth of less than £23,250 (but more than £14,250) and their home is not disregarded when assessing capital. LAs have the discretion to offer DPAs more widely should they consider them appropriate.
Many individuals choose to divest themselves of capital in later life in the hope of passing on assets to children in a tax efficient way. This may include transferring their home to their children or putting assets into trust.
However, it is important to be aware that if you do this and are then unable to fund care home costs yourself you could be charged with 'deprivation of assets' and you may still be assessed as if you still owned that capital.
The LA will apply the following test:
Having established deprivation of assets, if the individual in care will not accept a DPA, the LA will be able to issue proceedings in the County Court which may eventually lead to a sale of the property.
It is also important to remember that the level of care provided to those unable to self-fund may be very basic. This on its own should be enough to make individuals think twice before unnecessarily divesting themselves of capital.
The Care Act 2014 promised a cap on care fees of £72,000. This cap is now due to be introduced in April 2020. However, this is not as generous as it sounds as it relates only to the care component of the fees - and not the accommodation or living costs.
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