The Dilnot Commission
The prospect of going into a care home is not a pleasant one, and for many clients concerns over the quality of care are compounded by further worries that the family home will have to be sold to pay for the care, rather than being passed onto the next generation.
In response to growing concerns about the cost of care, in July 2010 the Government commissioned Andrew Dilnot, an economist, to look into the system of funding of social care in England and establish how to achieve an affordable care system.
His report recommended a partnership between the state and the individual to deal with the issue, and at the time of writing, it is looking likely that the Dilnot recommendation for a cap of £35,000 is going to be accepted by the Government.
If the recommendation becomes law, this will hopefully ease a lot of the worry around the subject of care home fees. For one thing, it should be possible to obtain insurance to cover the first £35,000 of care home fees, thus providing even more protection for the family home.
However, given the Government’s propensity to make “u-turns” and the fact that enactment takes time, this article seeks to give you an idea of how the present system works.
How much capital can you have before you have to contribute to your care home fees?
In England, a financial assessment is prepared when someone is taken into care to ascertain to what extent (if any) an individual is eligible to have their care home fees paid by their local authority. If you have a high income or over £23,250 in capital, you are expected to meet the full cost of your care.
If you are the beneficiary of a trust, this may be taken into account in calculating your contribution to the costs, depending on your entitlement to trust funds. In these circumstances it is strongly recommended that you seek professional advice.
Your home is a capital asset and so may be taken into account when calculating capital limits, but this is not always the case. In particular, your home should not be taken into account if it is occupied by a spouse, a close relative under the age of 16 years or over the age of 60 years, or a relative under the age of 60 years who is disabled.
The local authority is also required to disregard the value of your home for the first twelve weeks after the date of your permanent admission to a residential care home or nursing home.
When does the NHS contribute to care home fees?
In1999, it was established that the NHS was responsible for funding care in a home where the primary reason for that care was a health need.
This means that people receiving nursing care may be eligible for the NHS’s “Registered Nursing Care Contribution”, which is currently £108.70 per week. The key point about this NHS funding is that it is not means-tested.
However, if someone in a care home meets the eligibility requirements for NHS “Continuing Healthcare”, this will cover not only their nursing fees but also their cost of accommodation, personal care and healthcare costs.
To be eligible for Continuing Healthcare, the person in the care home must be assessed as having a primary health need, and have a complex medical condition and substantial and ongoing care needs.
The assessment process for Continuing Healthcare can seem bewildering. If it seems that an incorrect assessment of eligibility is made, the decision can be challenged, although this can take time and a considerable amount of effort.
However, if you believe that an incorrect assessment has been made for someone in a care home and wish to dispute fees already paid, it is important not to delay too long in taking action as strict deadlines apply.
What can the local authority do if you give away your home to prevent it being taken into account for assessing my contribution to care home fees?
If you give away assets in order to put yourself into a more favourable position when being assessed for your contribution to care home fees and financial assistance from your local authority, this may not be effective.
Your local authority may be able to “disregard” the transfer for the purpose of assessment. This means that the value of the asset could still be taken into account for the purposes of the assessment, even though you no longer have ownership of it.
Worryingly, this can mean that if you do not have sufficient other assets to fund your care home fees, you may be reliant on the recipients of your gift to help pay your care home fees.
In deciding whether you have sought intentionally to deprive yourself of an asset, the local authority looks at all the circumstances, including your motives for the disposal. A local authority’s decisions will vary depending on the facts, for example:
- You are a 75 year-old widower with known health problems, and an estate, including a house, which is worth less than the Nil Rate Band allowance for Inheritance Tax purposes (currently £325,000) so that no Inheritance Tax should be payable on your death.
You give your house to your two grown-up children, who allow you to continue living there, but a few months afterwards you need to go into a care home.
- You are a 60 year-old widow, in good health and with an estate of sufficient size, that there is definitely going to be Inheritance Tax chargeable on your death.
You give your house to your children, having taken advice on lifetime tax planning for Inheritance Tax purposes, and you remain in your house paying a market rent to your children. Aged 82, you move to a care home, as a result in a deterioration in your health.
In the first example, a local authority may well question the gift. The timing could be interpreted as suspicious; there appears to be no good reason tax planning for the gift and the children do not even take possession of the house. In the second example, it seems much less likely a local authority would question the gift.
The complexity of this area of law, as well as the potential tax implications, is why professional advice should always be obtained when a gift of the family home is proposed.