Care fees and your home – what can you do?
How does care funding work?
Before a person’s capital is utilised the majority of their income will first be applied towards their care fees and then their capital will be used to make up any shortfall.
If an individual’s capital is worth more than £23,250 they will be required to fund all of their care. If their capital is between £14,250 and £23,250, the local authority will make a contribution to their care. The local authority will fund all of their care when their capital falls below £14,250.
If or when an individual does not have sufficient capital/income to fund their care, it is possible that their house will need to be sold to fund their care.
There are some exceptions for when the local authority will not take the house into account, such as if the person has a spouse/partner/child who is disabled or over the age of 60 living at the property.
Why do people have to fund their own care?
Publicly funded care services face a £1.5 billion funding gap by 2019-2020 due to an ageing population, rising care costs, and government cuts. The Local Government Association estimates that this funding gap will grow to £3.5 billion by 2024-25. This means that it is very unlikely that the government is going to relax its approach to people funding their own care.
Is there any way to avoid funding your own care?
The short answer is no. Some hope that by giving their property or savings away it will mean that the local authority will have no claim on them. However, local authorities can investigate whether someone has given an asset away to deliberately avoid paying care fees. There are no time limits for how far back they can investigate. If the local authority can prove that an asset has been given away deliberately to avoid paying care fees then it has the power to potentially have the transaction set aside or to treat the person needing care as if they still had that capital, so they will still have to pay.
Making gifts can cause issues in other ways too. For example, if you gift your property to your child, the property can be at risk if they divorce, become bankrupt, or if they die and leave the property to someone else in their Will. There might also be unintended tax consequences.
If you are considering gifting property or assets it’s important to take legal advice so that you can be advised of your options and how best to proceed.
Is there anything else that can be done?
Careful planning through Wills can potentially protect up to half the value of a couple’s jointly owned property. However, we recommend specialist legal advice is taken before going down this route.