Recent press coverage has highlighted the complicated and changing rules surrounding the qualifying amount of capital savings for care home fees. Most people who have more than £23,250 in assets, including their home, have to meet the full cost of care. The threshold differs slightly in Wales, and in Scotland care home residents are able to access free personal care.

The key issues you should consider when thinking about protecting your assets and savings include:

Assessment of capital and the value of your home

When assessing your liability for care home fees a local authority will usually include the value of your house, although it is not taken into account in the following situations:

  • if your spouse or civil partner is living there
  • if a relative over 60 years old lives there
  • if a disabled relative under 60 years old lives there
  • if it is the main home of children under 16
  • during the first 52 weeks (subject to local authority discretion) that you are in care temporarily
  • during the first 12 weeks after you enter into care permanently

It is worth noting that a local authority can use its discretion to disregard the value of a house when assessing residential care fees in other circumstances.

Gifting in your lifetime

There are both benefits and pitfalls which should be considered. One pitfall that you may have heard of is the seven-year rule – otherwise known as 'potentially exempt transfers'. This means that gifts you make to individuals will be exempt from Inheritance Tax as long as you live for seven years after making the gift.

You are allowed to make some gifts without having to pay any tax at all, for example to established UK charities, national museums, universities and certain other bodies. You are also able to give any number of gifts up to £250 to each recipient These gifts are meant to cover things such as birthday and Christmas presents.

A carefully drafted and up to date Will

There are easy to understand and effective ways of protecting your assets for your partner and family by making provisions in your Will. If you already have a Will, you should review it regularly, particularly if there are any changes in your personal or financial circumstances, for example, if you are getting married, divorced, moving house, or having children.

A Lasting Power of Attorney

If you become incapable of signing paperwork, your spouse or relatives will have to apply to the Court to be able to manage your affairs for you. This is a lengthy and costly process. If you act now you can ensure that you protect your loved ones from dealing with this difficult situation. A Lasting Power of Attorney allows you to plan ahead by choosing one or more people to act and make decisions on your behalf.  You choose what they can and can’t do and in what circumstances.

Deprivation of Assets

The rules for deprivation of assets - meaning the reduction of your assets by spending, gifts, certain investments etc - can be quite complicated and will affect your local authority means' test for care home provision.

If a local authority arranges for you to enter a care home on a permanent basis you will be means tested to see whether you should make a contribution towards the cost of your care.  You may want to pass on savings or other capital to children or others during your lifetime, but it can affect your eligibility for local authority assistance with care fees and Pension Credit.  Transferring an asset out of your name does not necessarily mean that it will not be taken into account in a means test. Both the local authority and the Pension Service can, when assessing a resident’s eligibility for assistance, look for evidence of deliberate, or intentional, deprivation of capital such as a property.

Court of Protection and Deputyship

Whilst we all want to make our own decisions for as long as possible, this is not always possible due to old age, illness or injury. In the unfortunate event that someone you know becomes unable to deal with their own affairs our specialist team can help you apply to the Court of Protection to be appointed as a deputy.