Many people worry about funding their long-term care. Robert Mair spoke to the experts to find out what you need to know.

1) Prepare early – and know the facts

You need to think about care when you’re planning to make a will. Statistically, one-in-four women and one-in-six men will need long-term care at some point in their lives.

Residential care will cost you £26,500 a year on average, while nursing care will push the price up a further £9,000. This is more than many people earn in a year. Some of these fees can be paid for by the council and others, depending on your assets, or by yourself.

Word of warning: it is illegal to transfer your own capital to relatives if your prime motive is to avoid paying long-term care costs. So, again, plan early.

2) Put yourself first

Think of yourself first in front of others and plan for your care. If, for example, you go into a care home at 70, plan for another 30 years. Fees can go up, so you need to take this into account.

Look at bonds as a way of making the most of your money. Also financial gifts to relatives are a good way of avoiding inheritance tax, but here you should always keep within the law and specialist legal and financial advice should be sought.

3) Know who to speak to

Knowing who to turn to is one of the most daunting tasks facing anyone looking into long-term care. Is the person trustworthy and will they provide you with the best advice tailored to your needs?

For basic information about care funding, you can start with Google. But if you want more details, contact an Independent Financial Adviser (IFA) who specialises in long-term care. Look at the website where the search can be tailored to your needs.

4) Think about your Powers of Attorney

The move into a care home can be traumatic and the added burden of sorting out your finances can be difficult. Powers of Attorney can take this pressure off you. The idea is to hand over control of certain aspects of your life to someone you trust and give the ultimate decision to someone who would have your best interests at heart.

5) Your house and assets

Local councils use a means-testing approach in your application for social care. This is based on the government’s own means-test threshold for care homes, which says that those with assets over a threshold must pay for all the care, while those with less than a lower threshold are paid for by the council. Those in between will be assessed on a sliding scale as to how much they contribute.

Assets are any capital that you may have accrued in your life – including savings, investments and property. But property will be discounted if:

  • A spouse, civil or unmarried partner lives in the house
  • A relative aged 60 or over lives in the house, or is under 60 but ‘incapacitated’
  • A child under 16 lives in the house and it is his/her main home

The local authority also has to adhere to the ‘12-week disregard’ when calculating assets. This ensures the family home is not counted as part of the individual’s capital for the first 12 weeks after entering permanent care.

But the council does have some powers at its disposal. If the house is jointly owned with a friend or relative under the age of 60, the local authority will calculate the value of the person in care’s individual interest in the property.

It cannot force you to sell the house, but if you can’t afford the fees and don’t sell the home the council can place a legal charge on the property. This means they can gain access to the capital tied up in it at a later date.

If a spouse or partner still lives at the address, the council can still gain access to this capital at a later date. For example, if the property is sold for a smaller one, part of any money left over will be taken into account as savings of the individual in care.

These funding arrangements apply only to England and Wales.

6) Know your entitlements

You are entitled to a variety of different benefits while you live in a care home. These include:

  • Attendance allowance. This is a tax-free financial benefit for people over the age of 65 who have health problems, physical disabilities or mental health problems. It is not affected by any savings or income you may have. But you must need help or supervision to look after yourself. The money gained through Attendance Allowance does not need to be spent on care, and if you do not possess the faculties to make a claim someone else can on your behalf.
  • Disability living allowance. This is similar to Attendance Allowance, but applies to people under 65 years old who need care or supervision or who have difficulties walking. It is split into two different parts – a care component and a mobility component. You can qualify for one or both components and they are paid at different rates depending on how much the disability affects you.
  • Pension credit. A means-tested benefit, pension credit is paid to people over 60.
  • Savings credit. This is an add-on to the Pension Credit and applies to people over 65 years old.
  • The social fund for older people is a scheme designed to help people on low income pay for large expenses that are not normally covered by weekly benefits.
  • Council tax benefit helps people on low incomes pay council tax bills.
  • Housing benefit is paid to people who are renting and are on low income. It does not apply to people paying a mortgage, and is means tested.

7) Consider immediate or preferred care plans

Many organisations offer care plans designed to meet the cost of long-term care. Essentially, these plans ensure payments are made to your registered care provider for the rest of your life. They can be tailored to protect your capital in event of your death. But you should check with an IFA as to whether such a plan would suit your individual needs.

8) Disclosure

When applying for long-term care, reveal as much information about yourself as possible. This opens up more doors for you in terms of eligibility. With long-term care it is critical to be open as it will result in a likelihood of getting a better rate of return. The local authority should also carry out a full assessment of your needs, and this is highly recommended.

9) Be aware of deprivation of capital

Deprivation of capital is where you give away your property or savings deliberately to avoid paying for your care home costs. For example, if you have £30,000 worth of capital and give it all away to rely on council funded care. Both the local council and Department for Work and Pensions (DWP) will be entitled to incorporate this capital as if you still own it. Deprivation of property includes:

  • Giving away money
  • Transferring the ownership of property
  • Spending your capital on something unnecessary

The council and DWP will look at the reasons for giving away the capital and when this occurred. There is no time limit for this inspection either – meaning they can look as far back as they want. But money given away five years prior to needing care is sure to be treated differently to money given away two weeks before care was needed.

10) Don’t let the council have it all its own way

Although the council has strict thresholds, you should still monitor your capital carefully. Once it drops beneath the threshold, the council will be eligible to assess you, and you will be eligible for means-testing.

It is in the council’s best interests to do this rapidly. If they delay and your capital drops below the thershold they should reimburse you. Similarly, as soon as the council starts to pay your fees, apply for Pension credit (via the Pensions Service).