e-mail Paul Lewis on paul@deadline.demon.co.uk
Thousands of older people are still concerned that they will have to use the value of the family home to pay for their care in later life. In fact, most people need not worry. Experts agree that only around one in six or one in seven of us will end our days in a home. Nevertheless, the fear of losing your home - and your children‘s inheritance - is great and many people do want to do what they can to protect their home if they do have to go into care.
These fears have been made worse by recent court cases which seem to mean that none of your savings are safe - even the £10,000 the Government says you can keep - when the local authority arranges for your care. Sadly there is no safe, guaranteed way of ring-fencing your home to prevent its value being used to pay the charges that are made. However there are things you can do to reduce the risk. And the sooner you act, the more likely they are to will work.
Who pays for care?
If you need care later in life the social services department of your local council must assess the care you need and ensure you get it. So step one is to contact them. If they decide you do need to go into a care home - and that is usually cheaper than providing more than a few hours of care a day in your own home - then they must make sure you get a suitable place. Normally that will be in a local home run either privately or by a charity. But some councils still run their own homes.
Having found the home the council then assesses your finances to see who will pay. First they assess your capital - by that they mean your cash, savings and investments that you can get hold of. It does not normally include the value of your home unless it is empty. If you have savings over £16,000 then you must pay all the fees. If your savings are £10,000 or less then you will not be expected to use any of them to pay your fees. If they are between £10,000 and £16,000 then you will be expected to make a contribution of up to £24 a week from them towards the fees.
Then they assess your income. You will be expected to contribute all your weekly income except £14.10 a week for your personal expenses. However, you can keep any interest earned by your savings on top of this £14.10.
The balance of the fees should then paid by social services. However, these rules, which are set down by the Government, have recently been challenged in the courts. And it is now possible that some local councils will refuse to help with fees until your savings are well below £10,000. The law is still not clear and if that happens to you or someone in your family you should seek help from the local Citizens Advice Bureau.
Your home
The value of your home is not normally counted as part of your capital. It is ignored completely if
The definition of 'relative' is broad and includes your children (and parents!), uncles, aunts, cousins and their spouses. To count as incapacitated the relative has to get invalidity benefit, attendance allowance, disability living allowance, or severe disablement allowance.
The local council can ignore the value of the home in some other circumstances. For example if a younger relative who has been living with you and caring for you would have nowhere else to live if your home was sold. But there is not guarantee that the council will use its discretion to help you.
Shared homes
Many older people share the ownership of their home with a younger relative. Sometimes they do so because the relative helped them buy it or helps with the upkeep, sometimes the relative lives with them. If your home is jointly owned with someone else that can also protect it from the local authority if you go into care. The value of your share of a jointly owned home is usually counted as zero. That is because it is almost impossible to sell a share of a home.
So here are two legitimate ways to protect your home.
However, letting the debt mount up has two advantages. First, no interest can be charged on the debt while you are alive. So it is in effect an interest free loan. Second, you or your relatives can rent your home out and that can make a substantial contribution to the cost of the fees - even pay them in some circumstances.
Giving your home away
The obvious answer to all these problems is just to give your home away to your children or someone else who you eventually want to leave it to. But that can lead you into serious difficulties.
The first problem is that you no longer own your own home. Even if you trust your children implicitly no-one can predict the future. They may die before you do and then your home would be owned by whoever they left their property to. [Or worse, they may not have a will and it would become subject to the rules of intestacy and may end up belonging to a distant relative.] They may divorce and your home would then be involved in court proceedings. They may go bankrupt and your home would pass to their creditors. Or of course you may just fall out. Remember, the chances are that you will not have to go into a home at all. But once you have given it away, then your home will not be your own for the rest of your life.
The relatives you give it to may also find the gift causes them problems. If any of them get a means-tested benefit such as income support, family credit, or housing benefit then owning even a share of a house they do not live in will normally mean they lose that benefit.
One way to protect yourself from these problems is to put your property into trust. Trusts are a very old way of protecting property from legal problems and most solicitors can advise about setting one up. If you are thinking of giving your property away it is essential that you give it to a trust rather than to individual relatives.
Even if you do give your home away - whether to a trust or not - it may still not protect it from the local council. If you give your home away less than six months before you go into the care home, the council has the legal power to take it from whoever you gave it to.
If you give away your assets more than six months before you go into the care home then the council cannot use this power. But there are other ways it might try to make you pay.
Step one is to show that you gave away your home in order to increase the help you would get with your care homes fees. This called the 'deliberate deprivation' rule. Proving your state of mind is difficult but the council only has to show that getting extra help was a significant part of your motivation.
Once the council has established that you deliberately deprived yourself of your home then it can start sending you the bill for the care. Once that bill reaches £750 - which is only about about two weeks fees in most nursing homes - then it can go to court get you declared bankrupt. It is then possible that the council could use the bankruptcy rules to take back property which you have given away up to five years before.
No council has yet done so. And there are a lot of legal difficulties in the way. Nevertheless it is very likely that hard-pressed local authorities will try it if many people start giving away their property to avoid paying the bill for their care.
Government plans
The Labour Party said before the General Election that it would set up a Royal Commission to look into the question of who paid for the care of older people. In Government, no details have been announced of who will be on it or when it will report. But Royal Commissions are painfully slow and it is likely that the present rules will continue for some years yet.
September 1997
e-mail Paul Lewis on paul@deadline.demon.co.uk