Many of the enquiries I receive are about protecting the family’s inheritance by sheltering assets from the means-test. However, there are strict rules around “Deliberate Deprivation” which make this difficult, if not impossible. Fundamentally, the moment has passed if the need for care is “foreseeable”. The Local Authority, if asked to provide financial support, will investigate past financial transactions and any after a relevant diagnosis, dementia, for example, or the payment of Attendance Allowance (or a similar disability benefit) will be deemed to be deliberate deprivation. Capital and/or income disposed of in such circumstances will be deemed to still be available to meet care costs.
It stands to reason, therefore, that the sooner planning is started, the less likely it is to fall foul of the deliberate deprivation rules. With use of the sophisticated financial planning systems available to your Wren Sterling Financial Planner, it can be demonstrated what you can and can’t afford to dispose of during your lifetime. If, at the same time, this also reduces any potential Inheritance Tax issue, then so much the better.
Having said this, I do caution clients not to take this too far. According to the Office for National Statistics, in 2021 only 2.5% of the UK population over 65 was living in a residential care environment. So, is it worth compromising your standard of living on the off chance of being one of that 2.5%? Also, the more fundamental question is, do you want to live in the care home the Local Authority is prepared to pay for, or do you want something more comfortable?
There are some preventative measures I do discuss the following with all my married clients:
- Don’t leave everything to each other on the first death. If the survivor does not need the assets of their deceased partner, everything is available to pay for that care. A trust in each Will ringfences the assets of the first to die, including a half-share of the matrimonial home if the joint tenancy is severed, away from the means-test.
- If your traditional Wills with all assets going to each other are still in place when one partner goes into care, the other partner can consider changing their Will just in case they die before the partner in care. They could also sever the joint tenancy on the matrimonial home so that a half-share passes under the terms of the new Will, and not by survivorship to the partner in care.
These options will not necessarily be appropriate for everyone, but together my clients and I discuss a number of scenarios, and their options in each case.
Will my local authority pay for my care?
It would be hard enough if we were dealing with just one set of rules, but we’re not. Following devolution, care funding is different in England, Wales, Scotland, and Northern Ireland, although some of the basic principles are common to all four. I’ve highlighted the terms ‘financial thresholds’ and ‘savings’ above, as they deserve some special attention now that we’ve covered the basics.
The obvious difference is with the financial thresholds, which are currently: