When it comes to navigating care and associated costs, the process and fees can seem complex. If you are trying to calculate long-term funding for care homes for you or a family member, there are various factors to consider. We explain how this works and your options.
When someone needs to go into a care home, it can be a stressful experience for both the person and their family. Not only do you have to prepare them for a change of lifestyle, but families often face overcomplicated information regarding care fees.
Local authorities have a system in place that assesses the financial position of someone needing to go into a care setting. The costs will depend on their needs, such as residential vs. nursing care, net income, and ‘assets’. When we talk about assets, we are referring to that person’s individual level of wealth.
How much do you need to pay for care?
Below is a quick list of what’s taken into consideration by the council when funding care:
- The local authority will carry out a financial assessment of the assets and liabilities of the person needing care.
- If the person needing care has more than £23,250 in assets, then they will be expected to pay towards their care.
- When a person’s assets are assessed, this includes their bank accounts, savings, investments and property. It can consist of estimated income from unused pensions.
- If there’s a spouse or civil partner still living in the family home, this won’t be counted towards someone’s assets.
- It’s worth noting that gifts and cash transfers will be considered. The council will assess whether there’s been a deliberate ‘deprivation of assets’ to reduce care costs.
- If the person’s assets reduce and then fall below the £23,250 threshold, a new financial assessment will be carried out.
What happens if council funding is less than care home fees?
When the council decides on the amount someone needs to pay for their care, they will contribute a set amount towards the care home fees. Care homes are expensive, especially if you want a setting with a good reputation. Always check the Care Quality Commission website for care home credentials. In many cases, council funding falls short of a family’s chosen care home fees, which adds an extra financial pressure.
If the care home costs more than the council is willing to fund, then usually there is a Top Up fee option. In this instance, a third party can make up the difference to ensure someone’s preferred care home is chosen. It’s important to understand that the individual themselves cannot top-up this payment – it must be either a family member or friend.
Also, for severe and complex health conditions such as dementia or a chronic physical condition, there is also additional NHS funding available. A care assessment would be carried out to determine the level of nursing care needed.
What are your options?
If you want to prepare for long-term care home fees in the future, you have three choices:
- Don’t get ill or die before you need care
Sadly, this is the most cost-effective option, but it’s not one that we can fully control, even if we live a healthy lifestyle. It’s also the riskiest, as nobody knows what life has in store for them, which means this approach is likely to leave you unprepared. - Spend everything you have to ensure the local authority pay towards your care
Again, this is a risky strategy. The council could decide that you have reduced your wealth with the intention to lower your care costs. Any gifts or large spends in your later years could be seen as ‘deliberate deprivation of assets’ and would be included in the assessment anyway. Getting your assets below £23,250 is also tricky.
Remember, the council rarely pays for all of your care. Instead, they will usually take a proportion of your income towards the cost. And if the local authority are paying for most of your care, this will limit your options. You could end up in the cheapest home available, which might not provide a good standard of care. - Prepare for the cost of care using cash-flow planning
By taking account of care costs and allowing for more than the average rate of fees in your cash-flow planning, you will have more choices. This is the least risky option and one that we can control. By being proactive in your financial planning, this can help to ensure you’re well-prepared for whatever life has in store.
Fixed fee financial advice
Understanding the funding requirements for care fees can seem like a minefield. Information provided from local authorities regarding care fees can be complex and needlessly lengthy. We’ve found that it doesn’t always answer our clients’ questions. It’s also essential to take a considered approach to avoid deliberately reducing your wealth to lower your care costs (deprivation of assets). For more information, we recommend visiting the Age UK website.
If you are concerned about funding for long-term care, speak to our financial planners. At Balance: Wealth Planning, we provide financial planning advice on a transparent fixed fee basis. Our cash-flow planning software will give you a clearer view of your financial situation to help determine long-term care funding. We will carry out a review of your savings, investments and pensions to see how you might be affected by future care home fees.
If you would like a financial review in relation to potential care home fees, get in touch to speak to our financial planners.
Sources:
https://www.ageuk.org.uk/information-advice/care/paying-for-care/
https://www.independentage.org/get-advice/paying-care-home-fees-england-wales
