Care costs and their impact on your assets

Like many things in life, getting older is something you can’t avoid. As we reach our twilight years, some of us may need some extra care. Research carried out by Public Health England found that life expectancy has risen more quickly than healthy life expectancy. This was also backed up by ONS data which revealed an increase in life expectancy has led to an increase in time spent in poor health. Although the chances of you needing long-term care is quite low, care home costs could be a challenge you face – and they are not cheap.
How much does care cost?
The cost of care is very much dependent on the type of care you need and your location. It’s not uncommon for care home fees in the UK to exceed £1,000 per week. Figures from Age UK reveal that average weekly cost for long term care is £611 in England and £600 for the UK overall. London is the most expensive with the South East a close second costing £741 and £702 respectively. The North West had the lowest average weekly care costs coming in at £511, £5 cheaper than Northern Ireland (£516).
How are care home fees calculated?
A needs assessment is usually carried out by the local council who will find you a care home based on the outcome of that assessment. The council then carry out a means test which determines how the costs of care will be covered. A means test will consider all capital you may have including cash savings, bonds, investments and most importantly your property. If your partner passes away, the full capital value of the property will be included in the means test. Property is means tested at its present market value, minus any mortgage or loan you have on it, a further 10% of its value is also deducted should there be expenses to sell it.     If you have assets worth over £23,250 you will be responsible for your long-term care costs. It’s not until your assets have been reduced below the upper limit that you would be eligible for financial help from the local council.
Can you protect your home against care home costs?
The simple answer is yes but here’s what you need to be aware of. It’s been widely reported in the media about people using trust funds to protect their home against care costs in order to leave something to their loved ones when they die. This method can be considered a deliberate deprivation of assets by the local authority and they have the power to challenge anything that doesn’t look right. Deprivation of assets simply means giving away money, property or other assets. The key word here is deliberate. If the local authority thinks you were aware that you may need care at the time of giving away your assets and that it was done with the sole purpose of avoiding fees, they would see this as deliberate.
Where there is a will there is a way
It’s important to remember that deprivation of assets does not apply to a will. The biggest risk to assets comes when one person passes away and the other needs long-term care. For most people, their home is their biggest asset which means it is most at risk when it comes to covering care costs. The majority of home owners jointly own their property and leave everything to their partner in a will. This means if one dies, the other would own 100% of the property value – all of which is included in the means test.    
So, what is the solution?
Severing the tenancy so that each of you own a 50% share is the first step. Writing a will which states that your 50% goes to a trust when you die means that your surviving partner will only be assessed on half of the property value.     You might be thinking this isn’t really a solution as half of the property is still at risk from care costs. The chances are that an outsider would not be willing to purchase a property when part of it is legally occupied by any beneficiaries named on the trust by the deceased. For this reason, the value of the surviving persons share would be nil when it comes to a means test. Using this method to protect your home or other assets you want to leave to loved ones is not one to be entered in to lightly. It requires some thought and we recommend you speak with a professional before jumping in. Our team of independent financial advisors are experts in wealth protection and are best placed to guide you through the process, thanks to their extensive experience in the field. If you would like more information, please contact us here.

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