I am often asked how clients can protect their assets, most notably their house, in the event that they need to go into a care home in the future. It is hardly surprising that this is such a pressing issue for clients, as care home fees in Scotland can be in the region of £1000 per week. The law in this area is complicated and this article therefore aims to highlight the facts and dispel the myths around the avoidance of care home fees.
The first step when an individual needs to go into a care home is a financial assessment, which is carried out by the local authority to decide who should pay for the care fees. The assessment is used to determine the value of the resident's capital assets (including any property, savings, shares etc) which will in turn dictate whether they will qualify for local authority funding.
The guidance followed by the local authority in this respect sets out upper and lower capital limits and there are three possible brackets:
- The lower limit £18,000 – if a resident has capital assets of under this amount, the local authority will meet the total care cost each week;
- The upper limit £28,500 – if a resident has capital assets of over this amount, they will be assessed as being fully liable for the cost of their care themselves;
- If their assets sit at a figure in-between these two amounts then the tariff income applies which assesses the resident as paying £1 for every £250 of capital owned over £18,000.
Given the value of the upper limit, the bulk of people who own their own home will be classed as self-funding should they require care, and this is the reason why so many people consider giving away their house in a bid to protect its value for future generations.
Is your home always included?
Before rushing to do this, however, it is important to note that there are a number of scenarios where the value of your home is disregarded for the purposes of the financial assessment anyway, so you do not face having to sell your home to pay for temporary or permanent care costs.
Most importantly, if your stay in care is only temporary then the value of your home is ignored when calculating your assets. This is because it makes little sense to force someone in to a position where they face selling their home to pay for temporary care, leaving them with nowhere to go when they return to health.
If, unfortunately, a resident ends up in care permanently, the value of their home is disregarded for first 12 weeks of their care.
Further, if the resident's spouse/partner still occupies the house, or if a relative stays in the house and needs security of home because, for example, they are over 60, a child or incapacitated, then the value is not taken into account. The house may also be protected if a carer is living there in certain circumstances.
Deliberate deprivation rule
If, despite all of this, you are still keen to take steps to protect your assets, you should plan ahead and seek proper legal advice. There is no guaranteed way to avoid paying care home fees and this is because of the "deliberate deprivation" rule. If you deprive yourself of a capital asset so that you pay less of your care home fees, the local authority may assess that asset as still being yours and they could refuse to fund your care. This can leave you in a tricky situation as you are then liable for care costs when you may no longer have sufficient assets to pay them. It does not matter when care becomes necessary - in carrying out the financial assessment the local authority have scope to look back at your assets indefinitely so they will know if there is a sudden significant change in capital value.
You should therefore think carefully before transferring your house to relatives or into a Trust on the assumption that it will save the property and prevent you from having to fund your care, as it is not guaranteed to work. You can also leave yourself in a very vulnerable position if you live in a property which you no longer legally own.
It is not all negative though, as there are other, less extreme options available to you that comply with the law in this area, while allowing you to protect at least some of your wealth for the family. This can involve planning through your Wills or by making a small change to your Title Deeds.
If you would like to learn more about the options available to you, we will be happy to consider the best solution for you.
We're here to help
Should you wish to discuss this issue, please do not hesitate to contact the Private Client team at Harper Macleod using the form below or call one of our offices on:
Elgin: 01343 542623
We have solicitors across the country, ready to help in person or over the phone or on a zoom call.
We can provide the assistance you need to protect your assets and your loved ones. This will allow you to put your mind at ease, knowing everything is in hand.