JSP Financial Services Limited

Long Term Care

Our guide to Long Term Care is set out below.

              GUIDE TO LONG TERM CARE

INTRODUCTION

The concept of free care does not apply to long term care provided through Social Services, so meeting the cost of residential and nursing care in old age is a growing issue for many people. Given that life expectancy is expected to increase, more of us will require some form of long term care in the future.

The costs involved in long term care provision can be daunting, and whilst the State can help with some costs, eligibility is limited and many people are above the threshold at which state support is provided.

State funding of long term care is subject to a good deal of political and media attention, but any changes are expected to take years to implement, and in the meantime an increasing number of elderly people are having to self fund their care.

This guide aims to address the key issues involved in long term care provision – whether for yourself or for a family member. Going into care is a very difficult time for all concerned, but an understanding of your funding options can make the payment of care less daunting.

THE COST OF CARE

The costs of providing long term care are high and have been rising steadily each year. Additionally, costs can vary depending on where you are in the UK and on the type of care that is required.

Care At Home

Most people would like to stay in their own home when care is required, and local authorities try to enable this to be done for as long as possible. This can still be costly, the average cost of home care being £18-£20 an hour (UK Care 2020). Just two hours a day could therefore entail a cost of £13,000 - £14,500 a year, excluding higher rates for weekends/holidays. 24-hour care at home could entail a cost of between £800 and £1,800 a week typically, so residential care is usually more cost-effective.

Residential Care

The cost of residential care varies considerably by location and whether nursing is required or not. The following provides an indication of care home costs during the 2019/20 year (Paying For Care Laing & Buisson Survey):-

On average, the cost of a residential care home is nearly £33,540 per year, rising to £45,860 per year if nursing is required (higher for dementia care), although some care home residents pay as much as £78,000 per year + (Laing and Buisson Report, 2019).

Other Costs

The above are costs for residency and nursing only. There will be other costs such as clothing, trips, telephone calls and so on, so when considering a home it is important to find out what is and is not included.

HELP FROM THE STATE

Local authorities and the NHS can help with the cost of care, but support is limited.

Being Assessed For Care

A local authority has an obligation to conduct an assessment of an individual’s needs and the most appropriate place to meet those needs (a Section 47 care assessment) whether or not they can afford to pay for it. This usually involves a home visit, so having a family member or friend present to share in the discussions is often useful. Further discussions are then based on these “assessed needs”. If care in a home is recommended, then the local authority has a duty to ensure suitable care is made available.

Qualifying For State Support

State assistance with long term care is means tested, depending on the individual’s savings, property and other assets. In England, care bills will be paid in full by the State if an individual’s assets (including property) are less than £14,250.

An individual will normally be expected to pay for their own care in full if personal assets exceed £23,250.

A reducing scale of support is provided if personal assets are between £14,250 and £23,250, with the person contributing £1 a week for every £250 in assets over £14,250 (example: someone with assets of £20,000 would be expected to pay £23 a week towards care).

Local Authority Financial Assessment For Support

The local authority means test looks to include most capital and savings in an individual’s name, including bank/building society accounts, National Savings and Premium Bonds, stocks, shares and investment products, property and land (less any mortgage outstanding). Jointly held savings and assets are usually divided by two to calculate an individual’s share.

Some assets are disregarded however for purposes of the means test, the main ones being:-

*  Surrender values of life policies.

*  Some compensation payments held in trust or by courts.

*  Some investment bonds with a life assurance element.

*  Property that continues to be inhabited by a partner or dependant.

*  War Widows special payments.

*  The mobility component of the Disability Living Allowance.

*  Spouse or partner payments from a private or occupational pension within limits.

The local authority will assume that all income from benefits such as Pension Credit is being fully claimed, so it is important that all relevant benefits are taken up.

Local authorities may also want to look at recent transactions to check whether an individual has not deliberately deprived themselves of capital to qualify for support (for example investing capital into an investment bond at short notice, or transferring a property into a family member’s name).

These rules are stringent and mean that many people will not get any help with the cost of care. A person’s assets are however reviewed over time and authorities will begin to help with funding once assets fall below the upper capital limit.

Watch The Gap!

Local authorities set maximums for amounts they are willing to pay for the amount of care assessed, so even if an individual qualifies for full help with fees, there can still be a gap between the care home’s fees and the maximum the local authority sets. This can mean a difficult decision between funding the shortfall and moving to a cheaper nursing home. It may be possible to claim that there are no other suitable homes available within the price limits set by the local authority, who may then pay the full amount if the claim is upheld, although of course there are no guarantees.

Other Benefits And Allowances

There are a number of other benefits and allowances for those requiring care:-

Attendance Allowance

A non means tested, non taxable allowance for those over 65 who require help with basic functions such as bathing or eating whether at home or in care. The amount is £68.10 a week for those needing care by day or night, rising to £101.75 a week for those needing care by day and night. It is not payable however if the local authority is paying towards care.

Registered Nursing Care Contribution

If living in a care home which provides nursing care, then subject to assessment of how much registered nursing time is needed, there may be a tax free entitlement towards these costs paid direct to the care home. The level of the contribution varies across the UK but is typically £219.71 a week (standard rate) and £302.25 a week (higher rate if already on higher rate in 2007) in England.

Personal Expenses Allowance

If care fees are paid for by the State, individuals are allowed to keep a small allowance from their pensions for their own personal use, currently £28.25 a week in England.

Personal Care (Scotland Only)

Self-funders in care homes in Scotland can also receive a weekly payment towards their personal care as well as receiving a registered nursing care contribution. The individual is then no longer eligible to receive the Attendance Allowance however.

NHS Continuing Care

Severely ill individuals may qualify for “continuing care” as NHS patients, since the NHS is responsible for providing nursing care to people who need it, and it can be delivered in any setting. Continuing care is fully funded and is not means tested but only the severest cases are eligible.

NHS Continuing Care can include the full cost of a place in a care home that provides nursing, although there is a fine line between free health care provided by the NHS and means-tested social care which falls under the responsibility of local authorities.

New guidance covering this is contained in a “National Framework For NHS Continuing Healthcare” guide operative from 1 October 2007. This covers the concept of “a primary health need” – where there is a health need then the NHS should be responsible for all needs in any setting. The main areas of responsibility are:-

*  Primary health care

*  Assessment involving doctors and registered nurses

*  Rehabilitation and recovery

*  Respite health care

*  Community health services

*  Specialist health care support

*  Palliative care

The decision as to whether an individual is eligible for NHS Continuing Care is based on an assessment conducted in accordance with the “National Framework For NHS Continuing Healthcare” used by all Primary Care Trusts (PCTs) together with their local authorities. The framework has a checklist to identify people who are most likely to be eligible for NHS Continuing Healthcare and who should be referred for full consideration and assessment. The assessment covers 11 areas (“care domains”) which are defined as having a low, moderate, high or severe level of need, with four having a priority level. The care domains are:

*  Behaviour (priority)

*  Cognition, psychological and emotional

*  Communication

*  Mobility

*  Nutrition

*  Continence

*  Skin and tissue viability

*  Breathing (priority)

*  Drug therapies and medication

*  Symptom control (priority)

*  Altered states of consciousness (priority)

Priority needs in any of the four priority care domains, or severe levels of need in two or more domains, is likely to indicate that the person is eligible for NHS Continuing Healthcare. If there are a number of domains with high or moderate needs, this can also indicate a primary health need which should be taken into account. Low needs would indicate ineligibility.

Clearly, it is important to endeavour to ensure that the necessary assessments are carried out where applicable.

LONG TERM CARE FUNDING AND YOUR HOME

As anyone with assets over £23,250 including property is expected to meet the cost of care in full, it is easy to see that owing your home is the main reason why people fail to qualify for support with long term care costs.

A property can be excluded from the means test if it continues to be the home of anyone else, which can include:-

*  A spouse or partner

*  A relative over 60 or disabled

*  A minor under 16 who is dependent on the person in care

*  A separated lone partner with responsibility for a minor

*  In some circumstances, someone who gave up their own home to look after the person now in care.

If it is agreed that the property must be sold to help with the cost of care, there may be some breathing space through the 12-week property disregard. Provided other assets fall below the upper capital limit, the local authority should pay care home fees for up to 12 weeks to allow time to sell the property, although the authorities will take the individual’s pension income apart from the Personal Expenses Allowance.

If the property remains unsold after 12 weeks, the local authority can continue to pay the fees under a deferred payments agreement, but will seek to repay these costs when the property is sold or the resident dies. To be eligible, savings need to be below £23,250, no-one else can be living in the property and you must be in long-term residential care (not temporary stays).

Other Matters Relating To Your Home

A common question is “How can I avoid selling my home to pay for long term care?”. As mentioned above, a local authority can take into account the value of the home when assessing an individual’s means to meet care costs, and the authorities are wise to attempts to gifting a property to children or putting it in trust. Anything you do to try to protect the home from being assessed can be scrutinised by the local authority in terms of their “Deprivation of Capital Rules”. Authorities can “look through” any arrangements you may make to secure your assets to determine whether the prime motive was to avoid paying care fees, and can then pursue the recipients to reclaim the proceeds.

Does It Matter How The Property Is Owned?

Probably. Most home are owned as joint tenancies, so that on death the property is owned outright by the survivor. You can change ownership to “tenants in common” so that both parties own half of the property. Should either party need long term care, the other is entitled to remain in the property in any event, as noted above. On death of one of the partners, his/her share passes to the beneficiaries, which could be children for example. Should the survivor then need long term care, it is unlikely (although possible) for a local authority to take the value of the property into account since one half is owned by beneficiaries following first death, and the value of the remaining half is probably nil – who would want to buy half a house? At worst, only half of the value of the property can be taken into account.

Clearly, this type of planning would need to be conducted well before care was needed or thought may be needed, to avoid the “deprivation of capital” rules mentioned above.

Putting The Property Into Trust

This is sometimes suggested on the grounds that property held in trust cannot be assessed. In fact, a local authority can look back over any period of time without limit to determine if the significant motive in transferring the property into trust was to put the value beyond the reach of assessment for care. If that evidence exists then no matter how long the trust was set up, it will be deemed irrelevant. There has to be a very strong alternative reason for putting the house into trust in the first place. In addition of course, there could be an immediate Inheritance Tax charge if the value of the house exceeds the “nil rate band”, plus the possibility of losing the Capital Gains Tax exemption for principal private residences if you subsequently sell the property.

Letting The Property

This could deliver a regular income stream but you would need to ensure that net income after costs would be enough to cover the care bills.

 Equity Release

As long as someone is still resident in the property, this can release funds whilst still allowing the home to be retained.

Selling The House And Trading Down

This can help you to release a sum for investment to meet care costs if required.

Careful advice is needed in considering any of the above, since for example gifting property outright or into trust would mean you lose access, and we recommend consulting a solicitor before taking steps.

COVERING THE COST OF LONG TERM CARE

The cost of residential or nursing care can be immense, and careful planning is necessary. In practice, the answer is often a combination of financial products to ensure that care costs can continue to be paid for as long as possible.

An individual who wants private care could run out of money by using up all of their savings, meaning that they have to rely on the local authority to provide the care, possibly in a different care home. Additionally of course, using up all money to meet care costs means that there is no legacy to leave to loved ones.

Financial planning aims to ensure that care can be provided for as long as possible.

Some of the ways to meet the costs of care are:-

Own Income

Sufficient income may be available from pensions and existing savings/investments.

Family Contribution

Costs can sometimes be met by the person’s family.

Other Options

An individual may need to raise money by for example accessing savings and investments, selling the home or arranging an equity release or other loan on the home. Once the money is raised, decisions will be needed on how to invest it to pay for the care, especially as fees can increase over time.

Any financial solution ideally needs to be able to provide funds indefinitely since although the average stay in a care home by a self-funder is 4 years, there is a one in eight chance of living in care for over 7 years.

A financial solution would need to take into account risks and accessibility of funds, the income required, as well as your other aims, and could involve consideration of:-

Savings accounts

This is the simplest option – to utilise capital and the interest to fund the care costs. To maximise returns, tax free ISAs and some National Savings & Investments (NS&I) plans should be considered.

The advantage can be little investment risk, the disadvantages being the low interest rates currently available and the fact that capital can very quickly become depleted.

Investment plans

A range of investment plans can be considered, including investment bonds with a life assurance element (which are then disregarded for means-testing).

The advantages of using investment plans are that returns over the medium to longer terms can be higher than for deposits, helping to preserve assets, and some plans offer tax-efficient income and/or growth. The disadvantages are that, because of investment risk, they should be considered long-term, hence could be unsuitable for elderly and seriously ill people. 

Immediate Care Plans

These are specialist annuity-based plans which pay a guaranteed income for life in return for a one-off lump sum payment. The income can be tax free if paid direct to the care provider. The plans can be set up to provide an immediate income or one that starts at a later date.

Plans can provide income which increases each year with inflation to help keep pace with rising care costs.

The process involves buying a plan with a single one-off payment, which depends on (a) the amount you want to provide care, (b) whether you want to protect the income payments against inflation, (c) whether you wish to protect some of the capital on early death, and (d) your age, gender and state of health at the time you apply (all applications are underwritten).

The advantages are that the annuity income is guaranteed for life so your money will not run out regardless of how long you live, providing peace of mind. The disadvantage is that you are using your money in exchange for an income for life, and if you die shortly after going into care then they can represent poor value for money (although some plans offer elements of capital protection).

As mentioned above, in practice the answer is often a combination of financial products to ensure that care costs can continue to be paid for as long as possible.

HANDLING SOMEONE ELSE’S AFFAIRS

Going into care is a difficult time for all concerned, an an individual could be too weak or incapacitated to make the decision themselves. Even if you are in good health now, it is often advisable to plan ahead so that a trusted party has the power to make decisions on your behalf if the need arises.

Lasting Power Of Attorney (LPA)

Setting up an LPA gives someone you nominate authority to handle your affairs if you are mentally or physically unable to do so yourself. There are two types of LPA:-

Property & Affairs LPA enables the person appointed to make decisions about how your money is spent and your property and affairs are handled.

Personal Welfare LPA covers healthcare and welfare, including medical treatment and where you live.

An LPA can be set up via a solicitor and to be valid it needs to be registered with the Office of the Public Guardian, which can be done when the LPA is needed.

It should be arranged well before it is actually required since the person granting the power must still be capable of being involved in the decision.

If There Is No LPA

If a person is suddenly mentally incapacitated and an LPA is not in place, an application needs to be made to the Court of Protection by a representative (relative, close friend, solicitor) to become your Deputy. Once appointed, the Deputy is legally responsible for your finances, property, healthcare and personal welfare.

THE FUTURE OF LONG TERM CARE

State funding of long term care is subject to a good deal of political and media attention, but any changes are expected to take years to implement. In July 2011, Andrew Dilnot published his recommendations for the future funding of social care.

Dilnot said that the current system is not fit for purpose, will not cope with the increasing demands of an ageing population, and will not provide the level of good quality care needed. He listed a number of proposals:-

1) A more generous means-testing threshold of £100,000 for people in a care home. Those who have assets between £14,250 and £100,000 will pay a contribution towards their care, but costs will be met in part by the State. People who have more than £100,000 of assets will pay for their care in full up to a maximum limit.

2) The threshold for home care will remain unchanged, and the value of the house will not be taken into account. It will only be taken into account if you move into a residential care home.

3) A cap on care costs to be met by an individual of £35,000. Once this limit is reached, the State will pick up all ongoing care costs – general living costs will still need to be met, but the Commission suggested these be capped at £7,000 - £10,000 per year.

4) The removal of the local variability of costs, with a national threshold for care eligibility.

It is important to note that the above are the findings and suggestions of the Dilnot Commission only.

The Care Act 2014 followed the Dilnot Report although the caps on care costs etc were deferred.

 Details indicated as at August 2023