The Cost of Social Care - How to Prepare for Care Costs in Old Age

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A 1.25% National Insurance rise to fund health and social care proposed by the Conservative government has been passed by the House of Commons, despite the Tories’ 2019 manifesto pledge not to raise income tax, VAT or National Insurance.

£12 billion is expected to be raised each year from the increase in NI; Prime Minister Boris Johnson insists the increase should aid in covering overwhelming care costs for those who need it. The new plan is intended to assist in reforming England’s social care system, with key elements including:

A cap of £86,000 in care cost over a person’s lifetime – excluding food & accommodation
People with assets between £20,000 and £100,000 could be eligible for local council funding
People with assets below £20,000 could qualify for full funding
Income from share dividends will receive a 1.25% tax rate increase

The new plan isn’t expected to come into force until 2023; until then, the current social care rules remain in their place.

However, Rachel Reeves, a Labour Party MP, has raised concerns that people will still be forced to sell their homes. She said: "someone with a house worth £186,000 would still have to pay £86,000 even with this cap - and that's before living costs of going into a care home." as reported on BBC News.

While an increase in case funding may help some people, if you struggle with day-to-day activities because of an illness or disability or are expected to in the future, you need to plan for care expenses should you need it.

You could be entitled to social care funded by your local council, but if your capital is valued higher than the threshold, you will be required to cover your own care costs fully, even if you financially contributed to National Insurance throughout your life.

How are care costs paid for?

If you need to be moved into a care home, the local council are legally required to perform care needs assessment when requested. If you are considered eligible, they are then required to do a financial assessment of your assets, known as the ‘means test’. The type of things that they will consider when performing the evaluation can include:

Regular income – this will involve pensions, benefits, and earnings
Capital – this will involve savings, investments, land, property, and business assets

Once your local council determines whether they will offer you funding, they will provide a ‘personal budget’ statement which will declare the cost of care, how much they will fund and the amount you are required to fund.

Will I have to fund the cost of my own care?

If you have capital exceeding the threshold, then you will be required by your local council to pay for your care entirely. If your total assets are below the threshold, then depending on their value, you might receive the total amount or partial funding.

In England, the threshold is £23,250; if you have assets saved above this amount, you will not be entitled to any funding and will be expected to cover the cost of care yourself entirely.

If your assets are between £14,250 to £23,250, you will be entitled to some funding, which your local council will calculate and advise you on.

If your total assets are below £14,250, the council will be required to give the maximum funding. This won’t usually entirely cover the cost of care; therefore, you will be required to pay the remainder yourself.

Can you be forced to sell your house to pay for care?

Generally, your property will be considered as an asset in the means test and if you do not have other means of paying the cost of care, your house will likely be considered to cover the costs.

Despite this, there are certain situations where you will not be obligated to sell your house to pay for care; these include:

If you receive care at home – If you are receiving care at home, your home is not considered an asset.
If certain people still live there – partner, spouse, civil partner, close relative over 60/incapacitated, close relative under 16 (legally liable to support), ex-spouse, ex-civil partner, or ex-partner if a lone parent.

If you need to fund the cost of your care but don’t want to sell your home or use your capital, there are options available to you, including equity release. If you’re over the age of 55 and your property is at least valued at £70,000, you could be eligible.

Will a nursing home take your pension?

Your pension will be taken into consideration as your regular income in the means test, and you are expected to use your regular income to fund what the council will not fund, so if you are unable to use savings, your pension will be used to cover the expenses.

How can I protect my assets from nursing home costs?

Care costs can be considerably high and often quickly use a person’s life savings. However, it can be possible to protect your assets, for instance, by:

Giving family gifts
Set up an asset protection trust – property protection trust, life interest trust or interest in possession trust

If you choose to protect your assets, be careful of the Deliberate Deprivation of Asset rules. If your local council believes that you are deliberately reducing your assets to avoid paying care costs, they will try to recover the costs.

It is better to prepare in advance if you are certain that you might require care one day. If you need legal assistance to appropriately plan for your future, our friendly and knowledgeable Wills and lifetime planning solicitors can help you.

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