The person I care for has to go into a care home - who pays for this?

The short answer is that if the person who is going into a care home lives in England, unless they have a capital of less than £23,250, they will not be eligible for help from the Local Authority.

If their criteria are met, the LA will carry out a care needs assessment, followed by a financial assessment. Capital excludes 50% of a jointly owned capital and 100% of a spouse’s. It also excludes the house if the spouse is over 60 and still living in it, and investment bonds if they include life insurance.

Income is also part of the assessment, though 50% of a spouse’s private pension is not included. If that capital exceeds £23,250, the individual will have to pay for their care in full.

What counts as capital?

·       Buildings and land

·       National Savings Certificates

·       Premium Bonds

·       Stocks and Shares

·       Cash

·       Savings in Building Societies and Banks

·       Unit Trusts

·       Trust funds

·       ISAs

Does the house count towards the financial assessment?

If the person who is going into the home lives alone, then the house will be included in any financial assessment. If the person has a partner or spouse still living in the house, or one or more of the following living in the home: a relative over 60, a disabled relative, or a young person under 18, then it may be disregarded. However, if anyone who doesn’t fall into these categories lives in the home, it will be counted, and the LA may expect the home to be sold to cover the care home fees. In some circumstances, an alternative might be to rent out the home, using the rental income to top up the fees.

Transferring the title of the home into someone else’s name or giving away your assets may be deemed to be trying to cheat the system to avoid paying the cost of care, so if you are thinking of doing this, you must seek legal advice before acting. Otherwise, the LA may then refuse to fund your care.

So how do I pay for care?

Most people are self-funded if they have an income and assets over £23,250, so they will need to pay for the care home from their income and capital. They should still be able to claim Attendance allowance or PIP, and some may qualify for pension credits.

Likely, those who live alone (see previous paragraph) will eventually have to sell their home in order to release funds to pay for the care home. If this is the case, there may be some help towards the cost of care until the house is sold.

What happens if the money runs out?

Should the money run out and fall below the £23,250 threshold, then the Local Authority will make some contribution to the care home fees, after any income from pensions is taken into account.  However, it might also mean a move to a different care home or a smaller room, if the current one is too expensive.

Relatives are able to make third-party ‘top up’ payments to enable their loved one to remain where they are – if they can afford it.

Will the NHS pay towards the care?

In rare circumstances, if a person has been assessed by the NHS as having a “primary health need”, usually where they are deemed to have a complex medical condition which requires ongoing medical care or are at the end of life, then they would qualify for NHS Continuing Care Support. In this circumstance, the NHS will either pay the full cost of care or a fixed weekly amount towards it.

Funded nursing care is £254.06 a week. To be eligible for this, the Care Home has to be registered as a Care Home with nursing.

I had hoped to leave something for my children…

This is a concern for many people. Even with large capital reserves, it is likely that the value of the estate will dwindle as interest rates do not keep up with inflation and care home fees, and so the capital is reduced. This is particularly so if the person lives for a long time in the care home.

To offset this situation, it might be worth looking into the little- known subject of Care Fees Annuities.

What is a Care Fees Annuity?

A Care fees annuity works similarly to any other annuity in that it is purchased for an agreed sum of money after a medical assessment. When a person is approaching the stage of needing to go into a home, he or she can apply for an annuity and can then purchase it for a lump sum (but bear in mind that an annuity might be out of many people’s reach, as it can cost £200,000).  The annuity will then guarantee to pay either the whole cost or part of the cost of the care home for life. This income is tax-free, fully portable and offers index-linked options, if required.

Like any annuity, it is a bit of a gamble in that the person might die before all the value of the annuity has been used. However, it does take away the worry that the reserves will run out, and also it safeguards any inheritance. Of course, it means that there has to be a reasonable sum available to purchase the annuity, but it is certainly an option worth looking into, particularly if there is a property that can be sold in order to fund it.

Buying a Care Fees Annuity thus safeguards the remaining capital and avoids the possibility of having to fall back on LA funding. What is more, should NHS Continuing Care be awarded, the amount is paid directly to the individual instead of the care home.

These annuities come from well-respected insurance companies such as:

I have never heard of a Care Fees Annuity. Where can I find out more?

Care fees annuities are not widely known about, but there are a few specialist firms that deal with them and can give you advice and arrange quotes.

Visit Solla (Society of Later Life Advisers) on  Society of Later Life Advisers - SOLLA  for more information and a list of their members. Check that they are covered by the FSCS, which guarantees the income.