Easy steps to protect assets against care home fees

Protection of assets against care home fees remains a hot topic and pressing concern for many clients of Blanchards Bailey’s Private Client Team. Partner and Head of Private Client, Jerome Dodge, is recognised by the Legal 500 directory as being an expert in the field of estate planning and gives his views on the recent government announcements relating to care home fees.

Care Home Fees Reforms

“Proposals to put a lifetime cap on the amount an individual has to pay towards their long-term care are surely a step forward on the basis that state provision of social care has been woefully underfunded for many years.  However, plans to impose a £86,000 cap on care costs are more complex than they first appear and there is a question mark as to how much extra funding is actually being provided and whether this is keeping pace with increased needs.  It should be noted that the cap does not apply to “hotel costs” e.g. accommodation, food etc. and these will have to be paid for by the individual on top the capped contribution towards care costs.

It is clear the proposals are not a panacea and with the exponentially increasing elderly population suffering more complex illnesses, there will be debate for years to come on the ongoing level of the cap and the tax charges necessary to provide that cap and pay for social care generally.

Where does this leave the two vehicles commonly used to provide protection against care home fees?"

Wills made by couples can usually ringfence half of the assets from care home fees

It is perfectly possible for Wills to be made by a couple in which the assets of the first person to die are placed into trust to allow the survivor a guaranteed right to occupy the main residence and receive income from other assets (with flexibility to move home and gain access to capital) and ensure the capital value of the assets in trust cannot be taken into account by the Local Authority should the survivor need long term care. Due to the cap, on first glance, it would seem that this protection will be beneficial in fewer cases, but it is important to factor in the “hotel costs” in assessing whether such protection is still of practical benefit for any particular couple. It is also worth bearing in mind only care costs incurred after October 2023 benefit from the cap.

Health and Care (Welfare) Lasting Powers of Attorney (“H & W LPA”)

If you do not have a H & W LPA, decisions regarding social care, e.g. whether you are looked after at home or move into a care home, are made by the state and not your family, should you lack the mental capacity to make that decision yourself. These documents have become very important in recent years and the proposed changes to the funding of social care almost certainly make them even more vital. Currently, over half of requests for assistance from the Local Authority are rejected with limited room for challenge in the absence of a H&W LPA. A H&W LPA gives those you love and trust, the legal authority to insist on the care you are entitled to if at the time you lack the required mental capacity.

I think it will also become crucial that as people reach the cap in their personal contribution towards funding, that the decision as to whether care is provided by the state, which is usually of a lower standard than the private sector provides (and in my opinion, the gap is likely to increase), or continues being provided privately, is made by those you have appointed rather than the Local Authority. A H&W LPA not only puts the decision making in the hands of the right people but allows you to document your wishes in this regard and gives authority for them to be carried out, generally making life considerably easier for those close to you.

I would advise all clients generally to consider the following Estate Planning and Asset Protection Checklist:

1. Wills

• Has your will been reviewed in light of Inheritance Tax changes and particularly the introduction of the Residence Nil Rate Band?
• If you are a couple, have you considered trusts to protect assets from care home fees?

2. Lasting Powers of Attorney (“LPAs”)

• Do you have Health and Care (Welfare) LPAs?
• Does your Enduring Power of Attorney/Financial Affairs LPA include the ability for the attorneys to instruct a broker/Independent financial advisor on a discretionary management basis? If not, this is something you should discuss with us.

3. Inheritance Tax planning

• Do you understand your Inheritance Tax position, and have you recently reviewed the options available to you to mitigate tax?
• Have you received advice on your private pension and ensured it fits in with your estate/Inheritance Tax plan?

If you have not already taken my team’s advice on the above, we are always very happy to have an initial discussion with current or prospective clients free of charge to see how best we can help.”

To speak with Jerome or any member of the Wills and Estate Planning team please contact 01258 459361.