Rod MacLean: Plan well ahead to pay for your care in later years
First of all, long-term care can be extremely expensive. This may sound obvious to some, but many people don’t realise just how high the costs can be. Whether a local authority or private care home, you can easily be looking at paying in the region of £1,000 a week. Although the Scottish Government’s much vaunted “free personal care” payment will help, this currently only amounts to £177 per week, leaving the individual to pay the bulk of the charges.
The underlying rule is that if you have assets in excess of £28,000, you will be expected to fund you own care. That includes the value of your home, unless your spouse or a dependent relative lives there, so most homeowners will have to fully fund their care charges.
If the value of your assets amounts to less than £28,000, the local authority will contribute towards your care, and if you have less than £17,500, your care will be funded in its entirety.
However, this is still subject to a charge against your income, and generally people in care who are relying on local authority funding will be left with only £27.75 in their pocket each week.
It’s no wonder then that many will seek advice on protecting their assets to ensure they won’t have to self-fund their care when the time comes. Many think the solution is to transfer assets over to their children years before a care home may be necessary. However, that is fraught with danger.
If you give an asset away with the intention of avoiding care charges, you could still be treated as owning it, in which case you may still have to self-fund your care, which can lead to a whole host of problems.
There’s a common misconception that if this is carried out a minimum of seven years before the person goes into a care home, all will be fine. That is not the case. In theory, the ‘deprivation of assets’ rule applies without time limits.
The good news is there are steps you can take to safeguard at least a portion of your assets. For example, for couples, a trust in your Will can protect at least part of your estate from being used to pay for care fees without falling foul of the law.
If you have a private pension fund, you should consider the implications of drawing on your funds if it’s likely care will be required. You might be better using up capital assets first. There are also certain types of assets which will not be included in a financial assessment for care charges.
Before making any decisions it’s important to consider all potential implications.
For example, many private care homes now opt to admit those who can self-fund as opposed to being paid for by the local authority. They wish to ensure that prospective residents have enough money to pay for their care for a period of time. Therefore, if your assets indicate you won’t be able to self-fund, this could reduce the number of care homes available to you.
Don’t rush into an apparent ‘quick fix’ to transfer your assets. Far from being a solution, it could actually be to your detriment, and could limit the number of care homes that will accept you.
The best advice is to plan ahead. Old age and care homes may feel like a lifetime away, but it’s better to be prepared than waiting until it’s too late.
A good solicitor will be able to talk you through the process in detail and advise on the best course of action before you make any ill-advised moves.
Rod MacLean is a Partner at Wright, Johnston & Mackenzie LLP www.wjm.co.uk