Meeting the Cost of Care for the Elderly

And addressing challenges from Local Authorities

As people live longer, the cost to central and local government of providing care for the elderly has increased massively.

According to a 2018 study in The Lancet, an estimated 446,000 of over-85s will have “high dependency” care needs by 2035. An increase of over 91% from 233,000 in 2015. Put another way – 10% of all men and 20% of all women aged 85 and over, will need assistance with their care in less than 20 years.

Who fits the bill for elderly care?

Under the Care Act 2014, local authorities are duty bound to carry out an assessment of anyone who appears to require support, regardless of whether they may be eligible for state-funded care.

The charging regulations and statutory guidance that support the Care Act 2014 set out how a local authority must administer adult social care and how they must treat a person’s capital and income.

Financial support is available

But it is limited and means tested.

As the number of people entering the care system has increased, the attitude of local authorities towards those who have capital assets, has hardened. People are being asked to use their savings, as local authorities consider how to cover the cost. And hard-earned assets, such as the family home are being sold to cover care costs.

In cases where individuals have tried to protect assets such as property, local authorities have mounted successful legal challenges to gain access to funds. Naturally, this approach does not meet with universal approval. It seems, it’s no longer a foregone conclusion that when ageing parents die, loved ones will inherit the family home.

So, we thought it might be useful to explain how the current capital limits operate in relation to the cost of residential care and how a local authority might seek to challenge those seeking to avoid selling their home.

Care Needs Assessment

The first thing to look at is whether the person concerned will be entitled to receive NHS funded continuing care. This could be in a hospital, residential care home or their own home.

An assessment will be made of their care needs. For example, whether they will need a moderate or high level of support. Establishing whether the person will qualify for funding will depend upon the level of health care needs at the time of the assessment.

It’s worth noting that as time goes by, this is likely to change and ultimately, the situation regarding funding will too.

Establishing if You are Entitled to Funding

Your local authority will carry out a financial assessment, based on the CRAG Regulations. This will establish whether you are entitled to a contribution to care or nursing home fees. All your capital (savings / investments / property) and income (interest on savings / pension(s) / Pension Credit, Attendance Allowance or the care component of Disability Living Allowance) will be considered.

If you own your home, your local authority will count it as capital 12 weeks after you move permanently into a care home.

Unless your home is occupied by:

Your spouse, partner or civil partner;
A close relative over the age of 60;
A close relative who is incapacitated;
A close relative under the age of 16, who you are liable to support;
Your ex-spouse, partner or civil partner is they are a single parent.

There are other cases where local authorities can exclude property. In cases where a former carer is still residing in the property after giving up their own property to fulfil the carer role, is one example. Property is not usually excluded simply because you are renting out the property to a paying tenant. Rental income from these properties will not be included in the assessment.

Capital Thresholds

Your Capital	Threshold Calculation
£23,250 or more	The person will have to pay the full cost of your residential care, until your capital falls below this upper limit. Your local authority may then have to contribute with funding.
Between £23,250 - £14,250	Capital between these amounts will be calculated as providing an income of £1 per week for every £250 of savings. For example, capital of £20,000 would equate to £80 per week.
£14,250 or under	Capital below this threshold will not be included in the financial assessment.

NB: Contributions and capital thresholds are different in Scotland, Wales and Northern Ireland.

Beware!

Avoid Deliberately Excluding Assets from Financial Assessment

As successful local authority challenges become more common, many are anxious to exclude property from their capital asset list.

The two most commonly adopted are:

Changing property ownership from ‘joint tenants’ to ‘tenants in common’. In a joint tenancy, the right of survivorship allows the remaining tenants to take over a tenant’s property share if they die. In a tenancy in common, the deceased person’s share will pass to their heirs through a will or through the probate process rather than to the surviving tenants;
Placing the property into a trust so that you no longer own the property when you go into care.

Local Authority Challenges

Local authorities have several options open to them, by way of challenge.

Lack of capacity or undue influence

The authority could claim that you did not have the full mental capacity to understand and agree with the undertaking. They could also assert that undue influence or fraud forced you to take the action you did.

In this instance, the burden of proof is on you and your family to show that you did have mental capacity, especially if a lifetime gift of the property has been made.

Deliberate deprivation of assets

This is the most common (and serious) challenge.

The term ‘deprivation of assets’ is commonly used by local authorities when they believe someone has made a gift or transfer of assets to a third party, usually a relative, to avoid or reduce their liability to pay for care.

In order to prove that deliberate deprivation has taken place the local authority would need to show that avoiding paying care fees was a significant motivation. In this regard, the timing of the gift and whether the resident had, at that time, a reasonable expectation that they may require LA assistance to meet care costs in the future is crucial.

Does The ‘Deprivation of Assets’ Rule Apply to A Cash Gift Too?

The motivation behind the deprivation of assets is key. However, even where this is not the only motive, the gift – property or cash – may still fall foul of the rules.

For example; if you decided to make a cash gift from savings, at a time when you were ill or knew your health was failing, this is likely to be viewed by your local authority as deliberate deprivation. Timing is crucial.

What About ‘Disregarded Property’ Or Paying Off Debts?

Although gifts are probably the most common transaction that could fall within the deliberate deprivation rules, CRAG states that things such as:

adopting an extravagant lifestyle;
paying off debt (when it seems unreasonable for the debt to be repaid);
converting assets into property.

Could be reasonably treated as a deprivation of assets.

NB: Personal possessions, including jewellery or expensive chattels (assuming they have been owned for some time or have been inherited), certain life assurance products (including some investment bonds) are classed as ‘disregarded property’.

Be careful! If for example, you use savings or convert a policy into cash to buy an expensive piece of jewellery shortly before going into care, the Local Authority may treat the value of this jewellery as notional capital and not as disregarded property.

Our Advice

Plan! Thoroughly research all your options before you do anything. Seeking legal and financial advice will help you to take informed decisions and avoid any potential shocks in future.

If you or your family are concerned about this or need advice about planning for the future, please contact us to see how we can help.

Useful resources:

Age UK Factsheet.
Alzheimers. org – Paying For Care.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.