Care Home Planning:
The Care Act 2014
Michael Culver TEP CTAPS
Associate Solicitor and Team Leader
Bolt Burdon Solicitors
MichaelCulver@boltburdon.co.uk
020 7288 4741
07833 239187
Problems with Care Funding
• Extremely Expensive – ranges from £500 per
week to £1,500 per week
• Perceived as resulting in the enforced sale of
the family home
• Viewed as an Elderly Tax and Extremely
Unpopular
• Confusion as to NHS funding
Fully Funded NHS Care
• Available in limited circumstances following
stringent assessment. If qualify for NHS continuing
healthcare then all care costs paid for.
• If not fully funded NHS continuing Healthcare they
may still be eligible for NHS nursing care which
covers the costs of a registered nurse tending to
an individuals needs at £110.89 per week in
2015/2016
• Assessment can take a long time but back dating
can be insisted upon.
• Obtain Legal Assistance with Challenging
Decisions and essential to have both types of LPA
The Care Act 2014 Headlines
o Partly implemented 1 April 2015, fully implemented 1
April 2016
o Limiting an individual’s care costs to a maximum cap of
£72,000 – but not until 1 April 2016;
o Increasing the minimum threshold for self funding to
£118,000;
o Obligating Local Authorities to offer a Deferred Charge;
o Obligating Local Authorities to investigate a person’s
care needs, promote wellbeing and support
independent living
Maximum Cap of £72,000
• Not all payments go towards the cap
Only core care costs
Hotel costs not included i.e. heating, electricity, food etc.
Still make some contributions even when the cap is reached
Example:
So if paying £1,500 per week for care an amount as low as £270
per week may be going towards the cap meaning the person
involved would be in the care home for 22 years before the cap is
reached and in that time they would have paid £1.7m towards their
care
Contributions to Funding
• Prior to Care Act:
– Income in excess of £24.40 per week will be used
towards care costs
– With savings under £14,250 nothing is paid from
those savings towards care costs
– With savings between £14,250 and £23,250 (£1 for
each £250 over the lower limit is paid towards care).
– With savings over £23,250 the full cost of care paid
for personally
NB: 50% of joint savings included, potentially
interests in property and any assets given away to
avoid care fees
Contributions to Funding
• Following the Care Act
– Lower limit remains £14,250 (increasing to
£17,000 in 2016)
– Upper limit increased to £118,000 (but only to
£27,000 if the property is disregarded!)
– £1 for every £250 over lower limit continues to be
paid towards care in addition to income over
£24.40 per week
If a person has £117,000 in savings then they will pay
£400 per week (£20,800 per year towards their care
plus their available income).
Deferred Payments
• What are they?
– Mortgage on property from Local Authority
– Postpones need to sell the property allowing rental income to be
accumulated and put towards care costs
– Were available previously but local authorities had a discretion whether
to offer. Can now only refuse to offer in limited circumstances
– Lasts until property sold, debt repaid or otherwise 56 days after the
death of person involved.
– Previously Interest free – now interest can be charged during the
deferred period.
– If previously interest free from day 57 after death interest accrues. Now
debt is due in full 90 days after death following which LA can take legal
proceedings if not satisfied estate being dealt with promptly enough.
– Not compulsory : can sell house or fund with alternative means if
preferred.
– Obtain Legal Advice before signing the DP Agreement
Local Authority Obligations
• To access care needs and separately to
access funding
• Over four years to March 2014 LA’s
budgets for adult social care reduced by
£2.68 billion
• How will they cope?
What not to do
•
Take advice in the pub
•
What is suitable for one family may be totally unsuitable for another
•
Rely on “my kids will sort this for me”
•
This is often said with all the best intentions but can be deeply regrettable if
measures/plans not made in advance
•
Protected Property Trusts
Opinions vary but downsides are:
–
Costs
–
No Guarantee will work
–
House belongs to trustees – duty to act in beneficiaries interests subject to any
limitations
–
Tax implications of Trust on creation/every ten years and when payments made
from it
What not to do
•
Give House to Children/other relatives during
lifetime
–
–
–
Does not work – anti avoidance provisions
Risks – divorce, bankruptcy, falling out with children, death of children without adequate
wills in place
No effect for tax planning and can lead to capital gains tax being paid by non owners in
addition to Inheritance tax
• Sell House to children
–
–
–
To repay mortgage for example – If sold at an undervalue the result is the amount of the
under value being used in care calculations
If child obtains a mortgage on own home or extends own mortgage consider placing a
charge on parents property
Funds used must pass to parents or otherwise be used to pay off their debts/mortgages. If
not or otherwise suggestion of gifting funds back to children then entire property still used
in assessment
• Be fooled by the 7 year rule
–
This is for inheritance tax purposes not care home planning!
What not to do
• Set up a joint account with main caring
child
•
•
•
•
•
Child has control of funds
Inherits balance on death irrespective of will
Can be viewed as asset deprivation
Transactions looked upon with suspicion
Lasting Power of Attorney achieves the same desired result and more
• Sell house and use proceeds to extend
children's home for accommodation.
–
–
–
If relationship becomes strained no protection unless Trust/charge put in place which then
evidences parents ownership/interest
Divorce, bankruptcy, death problems as discussed earlier
Reasons behind gift i.e. Avoiding care likely to be investigated and deemed suspicions
leading to costly challenges
What Can we do?
Essential Steps:
1. Lasting Powers of Attorney – both types essential
2. Prior to needing care - Independent Financial Advice –
planning for additional income
3. At time of needing care - Legal Advice re funding options
4. Tenants in Common
5. Life Interest Trust in Wills
Any Questions?
Bolt Burdon Solicitors
Please contact us with enquiries:
Michael Culver
E: michaelculver@boltburdon.co.uk
T: 020 7288 4741
M: 07833 239187