Long Term Care & Estate Planning – introduction

Solutions to mitigating the costs of Long Term Care

Many people in UK worry about the 40% of their assets the taxman will take from their estates when they die in the form of inheritance tax, but very few realise that your local authority might take 100% of your assets should you need long term care.

In our increasingly ageing population, it is difficult to avoid the notion that many of us (common statistics say one in four of us) will end up requiring care in our later years.  The Average annual care home fee with nursing care in London and the Southern Home Counties is over £40,000.  And it’s only going to rise!

As a guide to funding in England (Scotland, Wales and Northern Ireland apply different rates) when an individual requires care they fall into one of three categories and are treated accordingly:

1. Those needing care that are single and currently have assets of over £23,250 have to pay for their own care, be it at home or in a residential or nursing home.
2. Those single people needing care who have assets between £14,250 and £23,250 will undergo an assessment of needs by the local authority.  The care fees will usually be paid by the local authority, but in turn, the local authority will take any state pension payments the person normally receives to help to pay for the costs.  The individual is left with an allowance which is currently £22.60 per week.  For every £250 worth of savings over the lower limit of £14,250, this allowance is reduced by £1 per week.
3. Those with assets below £14,250 will again be assessed by the local authority but will usually have their cost met in full but in turn, any state pension payments will be taken leaving the individual with an allowance of currently £22.60 per week.

 

If you own a property you are likely to fall into the first category so in the event of you needing Long Term Care, once any cash savings you might have are used up, your property may be sold to pay for the ongoing cost of your care until all but £14,250 has been used.

Under the Community Care Act 1990, the local council have the right, by law, to force the sale of your home to pay for these costs or to take a charge against your property to be repaid on the eventual sale of your home.  It is estimated that 70,000 homes are sold each year to pay Long Term Care cost.  Note that the home is excluded from assessment if:

1. A spouse or partner still lives there
2. A relative over 60 still lives there
3. An incapacitated relative still lives in it
4. A child under 16 still lives there and the person needing care is responsible for maintaining them.

So how can you protect your home (and other assets) from being sold to pay for any Long Term Care Costs?

Firstly, there are some things you should not do.  Some people believe that simply transferring ownership of their home or other assets to their children will avoid Long Term Care costs.  Unfortunately, this isn’t true!  It is not advisable to deliberately deprive yourself of an asset if your prime motivation is to avoid Long Term Care costs.

Cornerstone Wills has several solutions to mitigating the costs of Long Term Care and which solution works best for you will depend on factors such as:

• Your age, marital status, health, lifestyle and plans for the future;
• The value of your home and whether it is mortgaged;
• What other funds are available and any income generated;
• How much of your estate your also wish to protect for future generations.

One or more of the following options might be best for your requirements.  Click on the link for more information:

• The Home Protection Plan – a lifetime trust protecting the home;
• The Property Preservation Trust – a Will trust protecting your share of the family home;
• The Nil Rate Band Trust – a Will trust protecting your inheritance tax free allowance £325,000 (2024/25);
• A Flexible Life Interest Trust – A Will trust giving access to the home and the capital and income from other assets.
• The Family Trust – A lifetime trust protecting death in service benefits, pensions and life assurances.

It is worth noting that whatever solution is chosen, in order for the arrangements to have the best chance of being successful it is vital that the arrangements are made as early as possible so as to avoid the “deliberate deprivation” rules mentioned above.

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