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Date: 8 March 2007
PLANNING FOR FUTURE CARE COSTS
The downside of increasing life expectancy may, unfortunately, be mental and/or physical disability requiring professional care in later years.
This could be in the form of either straightforward personal care (e.g. help with washing and dressing) in a residential home or more extensive medical assistance in a nursing home
Residential and nursing homes are run both privately and by local authorities. For the purpose of this article there is no distinction but private homes may be more luxurious and expensive. Typical weekly fees can be about £400 for residential and £550 - £600 for nursing homes respectively.
You may have in mind the possibility of professional care being required for yourself, your spouse/partner or an elderly relative.
Not many people are in the fortunate position of being able to fund such care indefinitely. Savings and other hard earned assets acquired over the years from income already taxed, including the value of the home, can be depleted rapidly by the expense of care.
If money is no object and you require care, then you will go into the home of your choice. If you need care but cannot afford to pay, you have to be statutorily cared for. The problem for most people lies between these two situations i.e. they can afford care for a limited period before their money starts to run out.
Subject to your state of health, resources and homes available in your area let us assume that you (or the person concerned) will go into a private or local authority run residential or nursing home. What are the rules in relation to the liability of local authorities and/or the NHS to pay for such care?
Residential care
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If you are worth more than £21,000, including the value of your home, then you have to pay in full;
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If your worth is under £12,750 then the local authority will pay in full. Between these figures you have to make a contribution on a sliding scale;
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Only your share of joint assets or savings, however, is taken into account;
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Fortunately, your home is not counted if you still share it with your spouse/partner who remains there – there are other limited exceptions. But if, for example, you live alone, then the value of your home is taken into account as an asset and will have to be sold to meet fees if there are no other assets;
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There is a minor exception to this in that the value of your home is not taken into account for the first 12 weeks’ fees;
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Giving away your assets before anticipated care costs are incurred is not an answer to the problem, because local authorities have far reaching powers to investigate previous dealings with your assets, with no time limit. Unless you have a cogent and satisfactory explanation for a previous gift of your assets the local authority will assume a “deliberate deprivation” and you will be liable for your care costs as if the assets still belong to you;
Nursing care
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If nursing care is medically justified then NHS funding is available;
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The NHS will contribute in one of three bands of an amount of £40.00, £77.50 or £125.00 weekly, depending upon your care needs;
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In the most serious of case with a complex medical condition requiring a high level of specialist nursing, however, you will be eligible for what is technically termed “continuing care” - which is free of charge i.e. as if you were a patient in hospital;
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disputes may arise, however, about your needs and the appropriate level of NHS contribution. This could lead to appeals to the NHS ombudsman, or even an application for judicial review.
Summary
There is little room for manoeuvre with these rules but pre-planning is possible and the earlier the better. For example healthy joint owners can convert the usual legal form of ownership of their home from a joint tenancy to a tenancy in common. They then make mirror wills, leaving their respective separate shares in the home after their death to someone other than their partner.
This guards against the possibility of the lone survivor, falling ill, needing care in the future and then being forced to sell the house to pay for it. The local authority will have to assess the value of the whole property as virtually nil in those circumstances because half of it belongs to someone else - the market value of such a property would make it unsaleable on the open market.
This is a legitimate device, but professional help is needed in order to set up the scheme and avoid complications with a possible inheritance tax liability. Other forms of ring fencing assets and income against long term care costs are also available,
but only with careful financial planning and probably involving your accountant and/or an IFA.
If it is too late for this, there are insurance products and equity release schemes which can provide cash for people who are concerned about future care needs.
Enthusiasts who crave more detailed information should consult the bible - The Charging for Residential Accommodation Guide on the Dept. of Health website http://www.dh.gov.uk - (search for CRAG).
Geoff Lewis
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