Protecting your home from care home fees
9th October 2019
As you grow older, one of the things you might be most concerned about is the entire value of your home disappearing on paying care home fees.
Care from the NHS is free, but if you need social care because you are physically or mentally frail, you will have to pay for it yourself.
Over recent years, fees for care homes have risen rapidly. Research has found that Britons pay £10.9 bn a year of their own money into privately funded care. According to market intelligence provider, LaingBuisson, the average bill was £844 a week in 2018, compared with £445 a week in 1998.
If you have more than £23,500 in property, savings and investments, you will have to pay the full cost of care yourself during your lifetime and, if necessary, from your estate after you have died. This may not leave much for your family to inherit. Help from the local authority is available but it is strictly means-tested, which results in very few people qualifying for financial help. (The value of your home is not considered in your means test if you or your spouse or a dependant is living there).
To avoid paying for their social care in the future, some people take steps to get rid of all their assets but this may mean they could end up in a less comfortable care home than they had hoped for.
Is using a trust an option?
You may have heard of people protecting the value of their assets and property by putting them into a trust and often a solicitor has actively promoted these trusts, commonly called "Asset Protection trusts", via a local seminar. It is perhaps somewhat telling though that the solicitor practices we tend to work with specifically avoid offering these types of trusts.
Trusts certainly have an important part to play in financial planning and Rowley Turton will use various trusts with our clients. However, we are extremely cautious about these so-called "Asset Protection trusts". Often the benefits of these trusts are oversold and in 2015 several people in Nottingham were jailed for mis-selling these types of trusts.
In addition, the police are currently investigating an alleged fraud with another trust company with potentially over a hundred people affected. Not only may these people have been mis-sold their trusts, but also they might have lost some or all of their savings which were being controlled by the trust company.
On a practical level these so-called "Asset Protection trusts" can sometimes work to protect your assets from long term care fees but to some extent, they rely on the Local Authority not challenging reasons behind the establishment of the trusts.
The Local Authority can legitimately view the establishment of these trusts as ‘deprivation of assets’ if they feel the intention is to avoid paying care fees. If the Local Authority concludes that there has been deliberate deprivation they can then refuse funding for your care. Given that potential long term care fees protection is one of the key selling points of these trusts, and many of these trusts are specifically established by people for the key reason of sheltering their assets from those care fees, we feel that the Local Authority would, more often than not, have a reasonable case for arguing deliberate deprivation with these types of trusts.
If you are considering using a trust, it is vital to get professional advice from a good solicitor and make sure it is suitable for your individual circumstances. In some cases, there might not have been much real benefit of using these trusts. For example, your retirement income might be sufficient anyway to pay most or all of your care fees anyway. The level of your other capital may have been enough to meet the shortfall between your income and the fees for the length of your stay in care.
There were plans for the government to bring in a cap of £72,000 for care home costs in 2020, but these have been scrapped. In the recent Spending Review, an additional £1 billion for adult and children’s social care was announced by Sajid Javid, although it is yet to be seen what that will mean in practice.