On 7 September 2021 the Prime Minister announced plans to “reform” what people pay for adult social care in England. The proposals had been eagerly awaited, especially given that previous attempts to reform this area have failed.
It is intended that the existing pressures on adult social care will be relieved by additional funding derived from the introduction of a Health and Social Care Levy. The Levy is likely to impact the outgoings of employers, most employees and self-employed individuals who pay National Insurance contributions. The range of individuals who will benefit in practice from the “reform” is likely to be significantly more limited.
Current Law
The current position is that if you have capital assets worth more than £23,250 then you must pay your own care costs. If you own a property, then generally the value of that would be included in an assessment of your capital assets (subject to exemptions, e.g. if you are receiving care outside a care home or if a spouse/ dependent relative is continuing to live in your property).
There is no cap on the amount you pay for your care costs. A Which? survey estimates that the average cost of a nursing home in this area is £59,632 per year. An ONS study found that the average life expectancy in a care home for a female was 5.3 years. Based on these figures, average care costs for a self-funding female could be in the region of £316,000. It is unsurprising that many self-funding individuals are forced to sell their home (or to permit a legal charge against the property) to meet costs of this magnitude.
Proposed Reform
The latest proposals include the introduction of a cap of £100,000 on lifetime care costs incurred by an individual (regardless of age or income). In principle, this is a welcome proposal, giving certainty about the potential scope of care costs for each individual. However, the cap is only applicable to costs incurred for “personal care”. The cap is not relevant to living costs such as for accommodation and food. As such, before an individual reaches the care cap of £100,000, they might already have incurred hundreds of thousands of pounds in living costs.
The threshold of capital assets for assessing whether Local Authority funding is available will also be increased from £23,250 to £100,000. Again, in principle this is helpful because it should allow every individual to retain £100,000 of capital even if they need long term care. However, in many areas of England it is likely that any individual owning a property will exceed that threshold. This proposal is also disproportionately disadvantageous to those living in areas where property has a higher value. A home-owner who has a property worth £500,000 might have to pay out 80% of their property value before the Local Authority funds them, whereas a home owner who has a property worth £150,000 might only need to pay out 33% of their property value to be in the same position.
Helpful Hints
There are ways of planning ahead to try to minimise the impact of care costs on your assets. For example, couples should consider putting in place Wills that shield the assets of the first to die from care costs relating to the survivor of them, as this can help guarantee a significantly greater inheritance for the next generation. Lasting Powers of Attorney can also be useful for stating your wishes about care, for example to encourage your attorneys to avoid incurring accommodation costs if you can receive care at home. Taking expert advice on putting in place a Will and Lasting Powers of Attorney can mitigate tax, protect assets from care costs and make sure that your wishes are given effect.
At Neale Turk LLP we have the expertise to draft bespoke Wills and Lasting Powers of Attorney, tailored to meet your individual needs. We offer a transparent pricing structure which is published on our website.
Charlotte Searle is the head of our Private Client practice, with over 15 years’ experience as a solicitor and a fully qualified member of the Society of Trust and Estate Practitioners (STEP) the Association of Contentious Trust and Probate Specialists (ACTAPS) and Solicitors for the Elderly (SFE). Charlotte is also recognised in the Legal 500 national directory of leading lawyers. If you need legal advice, give us a call, send us an email or visit our website. We are proud to have been providing friendly, expert legal advice to local residents for over 60 years.