Affinity
Financial Awareness - Care Division
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Case Studies*
* Examples
used are for illustrative purposes only. All allowances and thresholds
illustrated are for tax year 2008 – 2009.
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Privately Funded Examples;
where we can help:
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Ellie is 84 years old and lives in a nursing home in
Worcester.
When her family came to us they were concerned that her
estate would be substantially eroded in meeting the shortfall in care costs
of £240 per week compared with her income. Her savings amounted to some
£90,000, and the house was valued at a further £160,000.
Ellie was in extremely poor health, and had a limited life
expectancy. Specialist Care Plans were discussed and quotations obtained,
but the risk of Ellie dying sooner rather than later meant the possible
loss of capital associated with plans of this type. We therefore examined
pure investment type solutions to provide an income to cover the shortfall
in fees.
Ellie died within two years, but fortunately, the investment
arrangement we had recommended paid out more than the original capital
invested on her behalf even after taking into account the contribution to
the shortfall in care home fees. The family then had the benefit of all of
her original capital and the house, illustrating that it is possible to
protect 100% of the resident’s estate with careful planning.
Lily is currently in receipt of care at a local nursing home
in England and is almost 95 years old.
She has assets in excess of £22,250 and must therefore fund
her care fees entirely from her own means. She has income of around £900
per month from all sources including her Attendance Allowance, and her
outgoings amount to around £2,300 per month, which covers the home’s fees
and some personal spending. She therefore needed to find £1,400 per month
to meet the shortfall.
Lily had no assets other than her then empty house, which
was valued at £200,000. The Local Authority will disregard the value of an
individual’s home for the first 12 weeks after admission to residential
care. After that period they may agree to a deferred payment agreement if
they are satisfied that reasonable steps are being taken to sell the
property. This essentially amounts to a loan to the care home resident
equal to the amount of their contribution assessed under the regulations
and the amount they are actually able to pay. Repayment would be made from
the proceeds of the sale of the property. In Lily’s case the house was sold
just before the end of the 12 week period, and the resultant funds were
then available with which to find a solution.
Using all the tools available to us, we were able to ensure
that all of Lily's fees would be paid for the remainder of her life,
and almost £140,000 was then invested for her potential beneficiaries. The
family had peace of mind knowing that Lily was being fully looked after,
and that 70% of her estate had been protected from the risk of being used
to fund care fees.
Edith is almost 80 and currently enjoys her stay in a
residential home in London.
She is comfortably off, and has an income of over £2,000 per
month. Her Care fees are in excess of £3,300 per month. She therefore
requires an additional income of £1,300 to meet her fees each month.
Because of the degree of wealth she has, she also has a
considerable Inheritance Tax problem, to be borne by her grandchildren when
she eventually dies.
With the skilful use of Trust planning we were able to
provide an income, tax free, from her investment portfolio, which met the
shortfall and immediately removed £113,459 from her estate. Should she live
another 7 years, the total removed from her estate would reach £312,000
plus any growth on her investment, and she would still enjoy a continuing
income. The family has been saved a minimum of £124,800 in Inheritance Tax
by this single piece of planning at current tax rates.
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Socially Funded Examples: where initially we are
limited in the help
we can provide:
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Joyce is 87 and has just gone into full time residential
care, funded by the Local Authority.
Tony, her husband remained at home with their 42-year-old disabled
son David. Tony and the rest of the family were aware of the ruling that
decreed that a spouse remaining in the home after their partner had gone
into care meant that the property did not form part of the assets used in
the Local Authority financial assessment. However, within 18 months Tony
had passed on, and Joyce, still being alive and well in the home, inherited
the property. Tony and Joyce's daughter, aware of the ruling, became
immediately concerned for David’s security.
The good news is that David, through his disabled status,
qualifies to stay in the property for as long as he likes. No charge or
other financial pressure will force him to leave. However, if he
voluntarily leaves at any point in the future, the property becomes
immediately liable for assessment, and Joyce, currently enjoying Local
Authority funded care, would have to start paying for her care under the
current rules. This inevitably would mean the sale of the house to raise
funds.
Once again we would be able to use the funds to ensure that
Joyce enjoyed care in the home of her choice for as long as she lived.
Please click here to read full details
about Protecting your Property.
David was in residential care until his condition worsened.
Fortunately he was staying in a dual registered home, which
had a nursing wing. He was assessed as being entitled to Registered Nursing
Care Contribution (RNCC), and a sum of £101 per week was paid directly to
the home to pay for his nursing care. Neither David, nor any member of his
family saw any of this money, and of course the care home fees remained as
they had been. Should his condition worsen, or indeed improve, then a
re-assessment will be required and the RNCC may be removed.
Please click here to read full details about Free Nursing Care.
Dulcie and James both needed care and were in the process of
financial assessment by the Local Authority.
As part of the process, their representative was asked about
their assets and replied that they had none. This is not unusual in the
case of say, council tenants, but further questions were asked and it was determined
that the property in which they lived had been gifted to their children 2
years before, when Dulcie had started to display signs of the onset of mild
dementia. As the property was their sole asset until this point, and as its
value fell below the then Inheritance Tax threshold, the family could come
up with no clear or viable explanation for the gift being made. Eventually,
although there were other minor reasons for making the gift, it was
decided that the avoidance of care fees was a significant part of the
reasoning. Dulcie and James were therefore assessed as still owning the
property and the Local Authority withheld funding. Responsibility for the
funding then fell to the children as owners of the property.
Had the property been gifted for other reasons, or at a time
when there was no foreseeable risk of either party requiring care in the
future, the Local Authority could not have reached this decision.
Please click here to read full details about Making Gifts
Alan had assets in excess of £22,250 when he moved into
care. He was therefore privately funded, paying fees of £600 per week.
At the end of 13 months Alan’s assets had dropped to below
£22,250 and the Local Authority proceeded to offer some degree of help.
However, they were limited by their “daily rate”, which only allowed them
to fund up to a level of £400 per week as a maximum and also by the
statutory requirement to assume that each £250 of his capital above the
lower threshold generated £1 of income per week. Alan therefore had to
continue to deplete his savings until they reached the lower threshold of
£13,500, at which point full financial assistance from the Local Authority
should have been forthcoming, and indeed was granted. However, full
financial assistance is subject to the same limit as regards the Local
Authority’s daily rate as previously mentioned, so Alan was faced with a
choice: either move to a less expensive home, with all the upheaval that
might entail, or find the extra funding to make up the shortfall.
Legislation would prohibit him from using his remaining
£13,500 for this purpose, so any additional funding must come from third
parties, in this case his family.
In some cases the care home itself will take on the burden
of extra funding on behalf of the resident, in reality just dropping their
fees to Local Authority funding levels. In other cases residents have been
moved to a “socially funded” wing of the home, where living standards are
lower. Finally, some homes may ask the care recipient to relocate.
Please click here to read full details about Fees Planning
Grace has been assessed as needing 24-hour care, but the
family want it to be provided at home.
Grace is in the position of living alone, and having very
little in the way of assets, and is therefore socially funded. Her family
believe that care in her own home would be the best option, as Grace
has reservations about leaving the property.
Because the Local Authority will be paying in this instance,
in reality they decide the course of action. Providing care in the home for
24 hours a day is a massively expensive process. The Local Authority is
always working to limited budgets, and in this case will insist that if
they are to pay, then Grace should enter into residential care. However,
if she does, the house becomes vacant and enters into the Local Authority
financial assessment. This will make Grace a privately funded case.
Unfortunately, her only option is to accept the Local
Authority assessment, and go into a residential home, as neither she, nor
her family have the funds to pay for care in her own home.
Hypothetically, if Grace needed a lower degree of care, the
solution might have been different. Social Services offers a range of
packages that may have been suitable, ranging from a simple “rise and
retire” package through to something more comprehensive, which may allow
for cleaning, meal preparation etc. Every Local Authority has different
budget restraints, but will always endeavour to provide a level of service
suitable to meet the individual’s needs.
Please click here to read full details about Domiciliary Care
