Social Care Reform and Asset Protection

Head of Private Client at Smith and Graham, Andrew Blair, considers the potential impact of the Social Care Reforms for clients considering asset protection……

On 7th September 2021 the Prime Minister announced proposals which will, if enacted, result in huge changes to the way in which social care is funded in future. Whilst there is a great deal of flesh to be put on the bones of the proposed reforms, Private Client lawyers are already considering their potential impact for clients who understandably wish to maximise the value of the assets which they may be able to pass to their families.

The Current System of Funding

Before looking at how things may change, let’s first take a look at how care funding operates now. The rules are however complex so the following is a “broad brush” summary.

  • If an individual is assessed as needing care in a care home, they will have to pay for it themselves if they have assets worth more than £23,250.
  • People may also have to contribute to their care from any income they have If a person owns assets which are valued below £23,250 but above £14,250 they will be charged a proportion of the costs of their care.
  • Where an individual is assessed as needing care in their own home, the £23,250 threshold also applies, but the value of their home is not taken in to account. Even if a person requiring care does not have to contribute to their care costs from capital assets, they may still need to contribute towards those fees from their income.

Importantly, if a person is not eligible for publicly funded care, there is no upper limit on the amount they might have to pay from their own assets.

What will the main changes be?

First of all, the amount which a person may have to pay for care during their lifetime will be capped at £86,000. Whilst at first glance this represents a significant improvement for individuals who are seeking to maximise what they can pass to their families, we can see that the cap will almost certainly not be as generous in practice that it appears at first sight.

This is because the “cap” relates only to personal care costs and does not include cost of living expenses, sometimes known as the “hotel element”, for individuals living in residential care. In addition, the cap covers only the cost of care home which the local authority would be willing to pay for, even if a more expensive one would be more appropriate or convenient for the individual concerned. For individuals needing care at home, the cap extends only to the number of hours the local authority considers an individual needs at the price the local authority would be willing to pay. As a consequence, the “cap” will in many cases prove to be more in practice than the headline figure.

Secondly, from October 2023 an individual would only the full costs of their care if their capital assets exceed £100,000 (compared to £23,250 at present). Individuals will contribute towards the costs of care if their capital assets exceed £20,000 (compared to £14,250 at present). Where an individual holds capital assets of between £20,000 and £1000,000 they will be required to make a contribution towards the costs of their care on a sliding scale, details of which are yet to be published at the time of writing.

It is also important to mention that we understand that the new rules will not apply to persons who are already funding care when they come into effect and we hope for some more clarity on the position for those individuals in time.

What does this mean for people who are wishing to maximise the benefit which they pass to their families?

The first thing to say is that the new proposals represent a significant improvement for clients who are seeking to maximise their estates for the benefit of their families. On the face of it, individuals will be allowed to keep more of their capital before becoming liable to pay the full costs of care, and will also benefit from an upper limit of £86,000. As we’ve seen however, for various reasons this cap may, in practice, be significantly higher and there is still much that can potentially be done to mitigate the impact of care costs, particularly where we jointly own our homes with, for example, a spouse, partner or other relative.

The good news is that through careful planning, we are able to offer guidance and assist clients with asset protection Wills which will ensure that clients can maximise the value of their homes which will in turn benefit the people and causes which are closest to them. Arranging Lasting Powers of Attorney can also be invaluable in ensuring that people have the assistance of trusted family members or friends to act on their behalf in the event of a loss of mental and/or physical capacity.

For further information please don’t hesitate to call to speak to one of our Private Client Team – we’ll be delighted to hear from you.

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