Financial advice: Will my assets be swallowed up by care home fees?

Stephen Duffy of Buckles Solicitors and Thornton Holmes of Orchid Financial Services are working together to help people in the rental property market.
Stephen Duffy of Buckles Solicitors and Thornton Holmes of Orchid Financial Services are working together to help people in the rental property market.
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MEN aged 65 today have a seven in 10 chance of needing care before they die. Women have nearly a nine in 10 chance. The average cost of care is £30,000, with some paying more than £100,000.

The Government’s definition of “care” does not include accommodation costs, so these figures can effectively be doubled. For a couple, these figures can be doubled again if they both require care. For those concerned about this, and in particular the value of their property being used up entirely on care home fees, what action can they take? Business editor John Kralevich has spoken with Stephen Duffy, a partner of Buckles Solicitors LLP, and Thornton Holmes, IFA and director of Orchid Financial Services Ltd, to find out the answer. 

These days, Governments cannot afford to pay for the care and accommodation costs of all care home residents. On July 4, 2011, a report was issued by the Commission on Funding of Care and Support, and this acknowledged that the system is in urgent need of reform, but even their best proposal would still see 30 per cent of someone’s assets being used on care costs (and even more for couples). It seems unlikely that the Government will implement the commission’s proposed reforms in full.

Current rules provide for extremely limited situations where care and accommodation might be free, but generally a financial assessment will take place. For those with assessable assets in excess of £23,250, the full care home fees are payable. Those with assessable assets in excess of £14,250 will be expected to make a contribution.

Assessable assets will almost always include the value of a property and cash. So, for those wanting to protect their assets from care home fees, some forward thinking is required.

Stephen Duffy said: “There are ways to protect assets legally, such as a couple signing carefully drafted wills to protect their property. But there are also a lot of unregulated companies out there offering schemes which ‘guarantee’ to protect a property, simply by giving it away. Unfortunately, the reality is somewhat different. The local authority’s rules are clear – gifts of any amount made at any time can be taken into account, if the reason for the gift was to avoid care home fees. The problem is that by the time the truth is realised, the person who gave their property away is in a care home, and the company that offered the ‘guarantee’ in the first place may not be in existence, or simply not have insurance to cover the cost of their mistake”.

Thornton Holmes said: “When it comes to cash assets, investment bonds are currently ignored in the financial assessment process for care home fees. The regulations say that the value of life policies must be ignored, and the underlying structure of an investment bond is that of a life assurance policy and so they are ignored”.

Stephen confirmed: “For those who have not invested in investment bonds, expert independent financial advice should be sought now, before the Government decides that they will change the law on this point, which they have been threatening”.

Stephen warned: “Even careful planning can be attacked by the local authority. It is a case of aggressive tactics by the council, who seem to be applying unfair rules unfairly. Buckles has the expertise to help people plan in advance to protect their assets from care home fees and to challenge incorrect financial assessments carried out by the local authority”.

For those who do not have time on their side, and so planning in advance is not an option, Thornton said: “Planning in advance of needing care is always the best option, but action can still be taken on behalf of those who are about to go in, or are already in, a care home. The sale proceeds of a property can be invested to provide an income, or used to purchase an Immediate Care Fees plan. This is an insurance policy to cover the difference between the care home resident’s income and the care home fees”.

It seems that the issue of care home fees is not going to go away, and that seeking the right advice at the right time is the key to protecting an inheritance for the next generation.