Planning your Long-Term Care

Many people worry about what will happen to their assets if they need to go into long-term care as they age. However, it is important to remember that only a small percentage of people over the age of 65, and 15% of those over 85, actually require residential care. In Scotland, if you have reached 85 years of age, you have already exceeded the average lifespan for men and women. Despite this, there is still concern about the potential depletion of assets to pay for care. In this article, we will discuss options to consider if you are worried about this issue.  

Assessing your Contribution to Care Costs 

First, it is important to understand how your contribution will be assessed. If you are required to enter residential care you must complete a financial assessment form. Within this form you will be required to disclose any gifts made you within the previous six months and any disposals of your home before entering care.  The Local Authority will use this information to calculate what your contrition towards all care costs should be. 

If you have capital above a certain level, including the value of your home, you may be expected to pay the full cost of your care. However, your home will not be considered as capital if certain relatives continue to live there. In certain circumstances property may therefore be exempt from any care cost calculation. 

What are my options?  

When discussing options for protecting assets during the possibility of long-term care, a common concern is the potential for one’s home to be sold to cover the cost of care. Here are some considerations for those worried about this issue:  

Gifting your home to your children

This can be risky as they could sell the house or it could be lost in bankruptcy, divorce, or other legal issues. To prevent this, you could reserve a liferent in the house, which gives you the right to live in the home until your death. However, this may be seen as an indication that the transfer to your children was not a genuine gift if you are later assessed for residential care.  It is also important to note that any local authority may consider the gift of your property as a Deprivation of Capital, that is you have intentionally sought to reduce your assets to avoid care costs. On this basis the local authority may challenge any gift of property.

Transfer the house into a discretionary trust

By doing so, you will no longer own the house. However, it preserves your right to live in the home and protects it from bankruptcy or divorce, but it must be clear that the purpose is not solely to avoid the cost of care, especially if it occurs within six months of entering care. Again, however, any transfer of property into Trust could also be perceived by the local authority as a Deprivation of Capital and challenged.   

Use a lifetime mortgage or other equity release vehicle

This would allow you to access the capital in your home while continuing to live there. This can be a good option if you do not need the money immediately, but it is important to be aware that these products can be expensive and reduce the value of your estate for inheritance purposes. 

Insure against the cost of long-term care

the insurance policy would pay out a regular income which could be used to offset the cost of your care. In regard to this, it is important to carefully review the terms of the policy and consider whether you are likely to meet the eligibility criteria.

Prepare a Will bequeathing your respective one-half share of the property

Another option that may be available to married couples, civil partners or co-habiting partners is to prepare a Will bequeathing your respective one-half share of the property to children or other family members/parties. This would mean if the surviving spouse/partner were to enter residential care in the future, their care cost calculation would be based on them owning a one-half share of the property only. 

Paying privately

Finally, you may choose to simply pay for care privately, but this can be expensive and may not be a feasible option for everyone. 

In summary, there are various options to consider if you are worried about the potential depletion of assets to pay for long-term care. These include gifting your home, transferring it into a trust, using a lifetime mortgage or equity release, insuring against care costs, or paying privately. It is important to carefully weigh the pros and cons of each option and seek the advice of a financial professional before making any decisions.  If you would like to discuss long-term care, you can visit our contact us page, or use the form below.