Does the Care Act 2014 go far enough when it comes to the tricky subject of funding care home fees? Ian Dyall, an estate planning expert at Towry, investigates.
It took 4 years for the Care Bill to make its way through parliament and be enshrined in law as the Care Act on 15 May 2014. So, can we now breathe a sigh of relief and forget about the devastating impact that funding long-term care has had on many people’s estates? I don’t believe so.
The date for bringing in the new proposals has been brought forward to April 2016, but it remains to be seen if the proposals will survive the general election and a potential change of government. Assuming they do, there remains the question of how valuable the changes will be.
First, the raising of the threshold for means-tested support to £118,000 for homeowners, below which the local authority will have to provide support, will help to preserve some assets for the next generation. But almost anyone who owns a property will have assets in excess of this figure.
Second, the maximum cost an individual will be asked to pay for their care will now be capped at £72,000, but this cap only covers what the local authority classes as care needs. So food and accommodation costs are not capped or included in this figure.
If we take the average weekly cost of a care facility to be £750 per week, the level of care costs within that figure may only represent about £400, meaning the cap would not be reached until someone has been in care for about 3.5 years. With BUPA estimating that the average stay in a care home is between 2 and 3 years, it’s clear that most people will still be required to fully fund their care.
So the trend of people trying to arrange their affairs in such a way that the state funds their care is likely to continue. However, these arrangements are coming under growing scrutiny, and are increasingly likely to be challenged.
Anti-avoidance legislation has long been in place. This is to ensure that if you try to deliberately deprive yourself of assessable assets, with the sole purpose of increasing the amount of care funded by the state, your assets are either recoverable, or will still be taken into account in the assessment of the local authority provision. So this type of aggressive financial planning may not work. And even if it does, most people would probably prefer to pay what is necessary to receive the quality of care in later life that they desire, rather than receive local authority care.
It is therefore important to consider the possibility of needing to pay for care in later life as part of an overall plan of how you wish to pass on your assets to the people that matter to you. Cash flow forecasting can be used to allow people to see how much of their assets they may need for themselves, and how much is available to help their family, ensuring that there is sufficient flexibility to cope with whatever the future may hold.
While the Care Act 2014 may be a step in the right direction, the difficult question of how the UK should fund quality care for an ageing population remains unresolved. Until it is, people need to consider the impact of paying for their care as part of their estate planning.