With an ageing population and rising care home fees, being able to fund future care is something of a worry to many people.
There are plans to introduce a £72,000 cap on costs in April 2020 (excluding accommodation or food bills). But how do things stand at the moment?
The current threshold
If you have more than £23,250 (£23,750 in Wales and £25,250 in Scotland) in savings and income, you will have to pay for your care home fees. Below this, you will have to contribute an amount based on means-testing.
Your property may be counted as capital after 12 weeks if you move into a care home on a long-term basis, unless your spouse or partner still lives there.
Once your savings fall below £14,520 only your income will be considered for a means-assessment.
Because of this, there may be a temptation to give away or transfer assets so that they are not counted in the assessment – this can be seen as ‘depravation of assets’.
Foreseeability and intention
Depravation of assets means you have intentionally reduced your overall assets solely to reduce the amount you have to pay towards the care services provided.
In this case, the local authority must show that you knew you were likely to need care and support when you transferred the assets. This is an evidence based test of foreseeability and intention.
There may of course be valid reasons why you no longer have an asset and the local authority should fully explore these.
When a financial assessment for residential care is carried out, you will be asked about previously-owned assets as well as those you currently own. Remember, with property it is quite easy for the authorities to check the ownership ‘trail’.
Depravation of capital
Examples could include making a lump-sum payment to someone, suddenly incurring substantial expenditure that is out of character, transferring the title deeds of a property to someone else, reducing the money you have by living extravagantly or selling an asset for less than its true value. It will be up to you to prove there is a valid reason that you no longer have an asset.
Depravation of income
It is possible to deliberately deprive yourself of income. For example, you could give away or sell the right to income from an occupational pension. Again, you will have to prove to the local authority that there is a valid reason you no longer have this income. The local authority may conduct its own investigations, rather than relying solely on the information you provide.
When is depravation deliberate?
The local authority must show why it has come to a deliberate depravation conclusion. They will look at how much time there was between you realising you needed care and when you disposed of your assets. However, if at the time you disposed of the assets you were fit and healthy and could not have foreseen the need for care and support, the gift may be justified.
Notional capital and income
If you are found to have deliberately deprived yourself of capital, the local authority can decide to assess you as if you still have the asset; this is notional (or theoretical) capital/income. In this case, your capital will be assessed as the total of your actual and notional capital.
In the case of notional income, the local authority must satisfy itself the income would or should have been available to you and calculate the amount from the date it could have been expected or acquired.
Recovering charges from a third party
If you transfer an asset to another person (a third-party) to avoid charges and fees, that person may be liable to pay the local authority the difference between what you would have been charged and what you were charged. However, they would not be liable to pay more than the amount they received from the transfer of the asset.
Local authority recovery of debts
If the local authority decides you have deprived yourself of capital and/or income and you do not pay the fees they expect you to make, you may end up owing them money. The local authority has powers to pursue unarranged and unpaid debts for services it has provided to you.
What is the debt recovery period?
The local authority has a maximum of six years to recover debts; after this period, the debt must be written off.
The nature of the rules on deliberate depravation of assets means it is not possible to predict with certainty whether the local authority will raise the issue during any future financial assessment. The rules also vary from one local authority to another.
If you have concerns about your property or other assets, contact us for a confidential chat about your options. Call 01302 320621.