Thinking about yourself, or a loved one, going into either residential or nursing care can be daunting and stressful. To add to that stress, the move into care can be an expensive one. It can cost over £1,000 a week, depending on where you live in the United Kingdom. While some people may be able to afford their own care home fees, there are others who may not be able to.
What do you need to pay?
In Scotland, people are expected to pay towards the cost of their accommodation in a care home from their income, such as a State Pension, and from their capital if they have more than £18,000.
Each year, the council sets standard rates for residential care and nursing care. The 2020/21 standard rates are currently £614.07 per resident per week for residential care and £714.90 per resident per week for residential and nursing care.
From April 2020:
- People in Scotland with capital above £28,500 are currently assessed as being able to pay for care themselves and will not receive means-tested help from the council
- People with capital between £18,000 and £28,500 are expected to make some contribution from their capital towards care costs but may receive some means tested help, dependent on income
- People with capital below £18,000 are not means-tested
Is there a way to mitigate care home costs?
It should be noted that if a person purposely gifts, or sells, their assets in a bid to reduce their capital knowing that they will have to go into care or are going into care, their local authority can still include those assets if they want to do a capital assessment. Purposely getting rid of assets, including to avoid care home costs, is known as deprivation of capital. If there is the belief that this has occurred, the local authority will still include the value of the assets that are no longer owned by the person. This means that the person who needs to go into residential or nursing care will be means tested, even if they no longer have any means.
There is also the common misconception that local authorities will only look as far back as seven years when financially assessing people. This is not true as local authorities can look as far back as they believe to be reasonable.
For these reasons, it is very important to remember to take professional advice before doing anything and to bear in mind that there is no guarantee that any of the below options will work, as the local authorities can change their assessment procedures at any time in the future.
Despite this, it is not all doom and gloom as there are circumstances where it is possible for a person to gift, or transfer, assets without them becoming part of the local authority’s calculation. This may be because a person wants to see the recipient of the gift enjoy it whilst they can or attempting to stop any family fall outs before they happen. There are commonly used options for someone considering their future plans.
The first is for a person to gift, or transfer, their house to their relatives. If a person makes the transfer shortly before going into care, knowing that it is likely that they are going into care, then it should be expected that this will be seen as a deprivation of capital. However, if a person is fit and healthy when they make the transfer, and there is no suggestion that they need care at the time or in the future, then this may not count as a deprivation of assets. Anyone wanting to consider this option should bear in mind, however, that they will lose control of their property in this scenario. The new owner could, quite rightly, choose to sell the property at any time. As well as this, if the new owner gets into financial difficulty or is going through divorce or separation proceedings, the property would form part of their estate for this.
Another option is a person transferring their house, or their share of the house, into a Liferent Trust. The property, or the share of the property, would then not be owned by the person who transferred it (the transferor) or by anyone else. It would be owned by the trust and the trust confers a use and income benefit in the property upon the person it is transferred to (the beneficiary).
A third option is for a person to increase their legitimate expenditure. This could be enjoying nice dinners with their spouse or taking the ‘once in a lifetime holiday’ that people have never had the time, or opportunity, to enjoy before. For the majority of us, neither of these things are currently possible, or advised, but hopefully it won’t be long until we can do these things again!
These are just three of the options that are available. Our offices across Scotland remain closed as we continue to follow the government’s COVID-19 guidelines, but our Private Client team and sister company, Blackadders Wealth Management, are continuing to advise clients and provide our usual services. They are available for any questions that you may have regarding this article or your personal affairs.
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