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Paying for care: don’t rule it out

Independent Financial Advisers Almary Green explore paying for care home fees.

People ask us “should I pay for care?” and how they can “keep their money out of the hands of the council” if at all possible.  However, there are real dangers in depriving yourself of your assets in order to avoid paying care fees.

Who takes the fees?

Firstly, it’s important to remember it’s not the Local Authority that is taking the money:  the Care Home themselves will collect the fees for the service they are providing.  If the person going into care has assets worth less than £23,250 (in England), then the Local Authority may pick up some or all of the bill.  If the person in care starts off with more than £23,250 but their assets drop below this threshold while they are in care, support may then become available.  The family home may be counted as an asset unless a spouse or dependant is living in the property.

The point to be made is that reliance on the Local Authority for your care fees will reduce the family’s choices.  The Local Authority will only fund care up to a standard amount and that will cover care in one of their approved homes.  Whilst these homes are undoubtedly perfectly acceptable, if you have a specific private care home in mind, Local Authority support may not be enough.  If you are paying a higher than standard fee, the difference would need to be met – perhaps via a top-up from family members.

Care costs in Norfolk

At the end of the day, it may not be about the numbers, but rather making sure that the person going into care is where they want to be and has the environment and facilities appropriate to their situation.  Putting Mum or Dad into a home is a difficult enough decision for a family already:  it makes sense to give yourselves the widest possible range of options.  Having said that, care fees are indeed a major drain on family resources.

Figures from the BBC in 2016 suggest that weekly residential care in Norfolk will cost in the region of £595 per week.  Extrapolate that figure out to a year and you are looking at nearly £31,000 in fees.   In fact, in our experience, many homes will charge a higher fee than this.

Beware ‘Deprivation of assets’

It’s not therefore surprising that families are worried about the erosion of family wealth and there are cases where assets have been passed down through the family to ensure they are not lost.  However, there are strict rules about what is known as deliberate deprivation of assets:  if the person in need of support is deemed to have deliberately given away assets to avoid paying care fees, then the Local Authority may still count them as assets and refuse their support – leaving the person in care reliant on family members who may or may not be able to access the value of assets that were passed down.

Solutions for planning ahead

It is possible that a strategy to manage a future potential Inheritance Tax liability will include measures that will also reduce the value of someone’s assets when the means assessment for care fees takes place, but the rationale for the measures must be the tax planning benefits rather than avoiding care fees.  There are insurance-based Care Plans that will provide the necessary top-up to income to pay for care fees.  Immediate Care Plans are a type of annuity in that they provide an income for life in exchange for an initial one-off payment.  The benefit of such a plan is that they ringfence the spending the family makes on care fees for a family member, so that remaining assets are not eroded.  However, they are reliant on an initial substantial investment so families may have to turn assets into cash in order to purchase a suitable plan.

We’ll return to Care Fee Planning in later blogs:  if you have queries or areas that you would like us to cover, please email [email protected], or visit