Recent press coverage has highlighted the complicated and
changing rules surrounding the qualifying amount of capital savings
for care home fees. This article covers the key issues you should
consider when thinking about protecting your assets and
Most people who have more than Ł23,250 in assets, including
their home, have to meet the full cost of care. The threshold
differs slightly in Wales, and in Scotland care home residents are
able to access free personal care.
Assessment of capital and the value of your home
When assessing your liability for care home fees a local
authority will usually include the value of your house, although it
is not taken into account in the following situations:
if your spouse or civil partner is living there
if a relative over 60 years old lives there
if a disabled relative under 60 years old lives there
if it is the main home of children under 16
during the first 52 weeks (subject to local authority
discretion) that you are in care temporarily
during the first 12 weeks after you enter into care
It is worth noting that a local authority can use its discretion
to disregard the value of a house when assessing residential care
fees in other circumstances.
The key issues you should consider when thinking about
protecting your assets and savings include:
Gifting in your lifetime
There are both benefits and pitfalls which should be considered.
One pitfall that you may have heard of is the seven-year rule
– otherwise known as 'potentially exempt
transfers'. This means that gifts you make to individuals will
be exempt from Inheritance Tax as long as you live for seven years
after making the gift.
You are allowed to make some gifts without having to pay any tax
at all, for example to established UK charities, national museums,
universities and certain other bodies. You are also able to give
any number of gifts up to Ł250 to each recipient These gifts
are meant to cover things such as birthday and
A carefully drafted and up to date Will
There are easy to understand and effective ways of protecting
your assets for your partner and family by making provisions in
your Will. If you already have a Will, you should review it
regularly, particularly if there are any changes in your personal
or financial circumstances; for example, if you are getting
married, divorced, moving house, or having children.
A Lasting Power of Attorney
If you become incapable of signing paperwork, your spouse or
relatives will have to apply to the Court to be able to manage your
affairs for you. This is a lengthy and costly process. If you act
now you can ensure that you protect your loved ones from dealing
with this difficult situation. A Lasting Power of Attorney allows
you to plan ahead by choosing one or more people to act and make
decisions on your behalf. You choose what they can and
can't do and in what circumstances.
Deprivation of Assets
The rules for deprivation of assets - meaning the reduction of
your assets by spending, gifts, certain investments etc. - can be
quite complicated and will affect your local authority
means test for care home provision.
If a local authority arranges for you to enter a care home on a
permanent basis you will be means tested to see whether you should
make a contribution towards the cost of your care. You may
want to pass on savings or other capital to children or others
during your lifetime, but it can affect your eligibility for local
authority assistance with care fees and Pension Credit.
Transferring an asset out of your name does not necessarily mean
that it will not be taken into account in a means test. Both the
local authority and the Pension Service can, when assessing a
resident's eligibility for assistance, look for evidence of
deliberate, or intentional, deprivation of capital such as a
Court of Protection and Deputyship
Whilst we all want to make our own decisions for as long as
possible, this is not always feasible due to old age, illness
or injury. In the unfortunate event that someone you know
becomes unable to deal with their own affairs our specialist team
can help you apply to the Court of Protection to be appointed as a
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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