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| Article by Chris Lucas |
Care funding might seem like a confusing topic, but it is an issue which is likely to affect many of us at some point in our lives. If you or a loved one is going into residential care, it is advised that you seek advice early on. Lack of planning can result in the depletion of assets which can have a big impact on the inheritance for those loved ones left behind.
The present position
If you are in need of residential care, the current position is that you will be required to pay the full cost of your care for as long as you need it if you have assets worth over £23,250. This is known as the means test threshold. If your assets are worth less than £23,250 but more than £14,250, you will be required to pay a contribution.
What are the proposed reforms?
Earlier this year, the government set out reforms to adult social care funding which are due to be implemented in April 2016. These reforms can be broadly summarised as follows:
- A cap of £72,000 on the total amount any individual will have to pay for their care, meaning that after this amount has been paid the local authority will step in and meet the costs;
- Deferred payment arrangements to ensure that no one will have to sell their home in their lifetime to pay for their care;
- Increasing the means test threshold from £23,250 to £118,500, meaning that those with assets worth less than £118,500 (as opposed to £23,250) will be entitled to some financial assistance from the local authority.
These plans appear to be a considerable step forward and the idea of capping care costs is likely to be welcomed by many. However, the reality is not so simple…
The cap only applies to ‘care’ costs i.e. the cost of personal care. ‘Hotel’ costs i.e. the cost of rent, heating, food etc. will not be covered and will need to be paid by the resident even after the cap has been reached. The government has recommended a cap on hotel costs at £12,000, however it is unlikely that this will be implemented by many private care homes.
Another important point to be aware of is that the £72,000 cap will be calculated using the relevant ‘standard rate’ set by the local authority as opposed to the actual amount paid by the resident. For example, if a resident is paying £800 per week for their care, but the local authority’s standard rate (i.e. the amount it would usually cost that local authority to meet that individual’s care needs) is £450 per week, that resident would be required to fund their own care for 160 weeks before they reach the cap (£450 x 160 = £72,000). Note that the standard rate varies from local authority to local authority and the rate will therefore depend on where you live.
The above leads on to a third issue, namely that many residents may not benefit from the cap at all if they are not in residential care for long enough. According to a study conducted by BUPA, the average length of stay is approximately two and a half years. In the example above, the resident would need to be in care for 160 weeks, just over three years, before reaching the cap.
After the cap has been reached, the bill will be met by the local authority, however this is still likely to be only at the local authority’s standard rate, which means that any extra care costs would need to be paid by the resident or their family.
The £72,000 cap on costs is therefore not as straightforward as it seems because it does not include hotel costs and any care costs beyond the local authority’s standard rate. This means that many self-funded residents may have to pay a lot more for their care than they might originally expect.
Deferred payment arrangements – deferring the pain!
From April 2016, the local authority will be required to offer a deferred payment arrangement to any individual going into care where that individual’s home is being taken into account in their financial assessment. The aim of this is to ensure that no-one will have to sell their home in their lifetime to pay for residential care. Having to sell your home or indeed the home of a loved one to fund residential care can obviously be an upsetting experience, therefore the idea of a universal deferred payment scheme sounds like a good thing.
However, careful attention must be paid to the phrases ‘deferred’ and ‘in their lifetime’. Whilst the local authority would meet the care costs to prevent the resident from having to sell their home, the local authority would also place a charge on the resident’s property to cover the costs plus interest. The obvious disadvantage here is that on the resident’s death, there would be a large debt owed by the estate which would need to be paid off before any inheritance can be passed on to the estate's beneficiaries.
Increasing the means test threshold – the State will not provide!
At the moment, the local authority expects you to fund your own care if you have assets over £23,250. This upper threshold is to be increased to £118,500, which is certainly good news, particularly for those people with modest assets over £23,250.
However, the lower threshold of £14,250 is not set to change, which means that those with assets between £14,250 and £118,500 will be required to pay a contribution. The way it works is that you will be assessed as being able to contribute £1 per week for every £250 that you have in capital over £14,250. For example, if you have £118,000 in savings, you will be expected to contribute £415 per week towards your care. This is quite a significant contribution, bearing in mind that the local authority is likely to pay the difference only up to the standard rate and there may be additional care and hotel costs on top of this.
The essential point to bear in mind is that even after the changes have been implemented, most people will still have to pay something towards their care and many will still have to pay quite a lot. Only those with assets worth less than £14,250 and those with serious healthcare needs will get care for free.
If you or a loved one has concerns about going into residential care or if you would like any advice in relation to the issues surrounding care funding, please feel free to contact me on 01992 422 128 or send me an email at chris@gardenhousesolicitors.co.uk.
Tel: 01992 422 128
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
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