Understanding Your Financial Assessment for Care

If you require long-term residential care, the financial assessment conducted will include a review of any gifts made within six months prior to the assessment and any previous disposals or transfers of your property – even if they occurred years before.

In cases where relatives remain living in your home, your property might not be included as a capital asset in the financial assessment. This could significantly affect the eventual care contributions expected from you.

Options to Protect Your Assets

Concern over the potential sale of one’s home to cover residential care costs is common. Here are updated strategies for 2024 that you might consider:

Gifting Property with a Lifelong Residency: Transferring the title of your property to your descendants can help you retain the right to live in your home through mechanisms like ‘lifelong residency’ or ‘liferent.’ This arrangement may offer some protection against certain risks, such as bankruptcy or divorce settlements involving the new title holders. It is important to note that local authorities may interpret this kind of property transfer as “Deprivation of Capital” when calculating your contribution to care costs, potentially still considering you the owner for this purpose.

Creating a Discretionary Trust: Placing your property into a discretionary trust alters the ownership structure while allowing you to continue residing there. This can shield the property from personal financial risks faced by the trustees, such as bankruptcy or divorce. Bear in mind that local authorities may also view this transfer as a form of “Deprivation of Capital,” which could be subject to dispute when determining your care cost contributions. Trusts can offer valuable benefits, particularly for estate planning.

Exploring Equity Release Schemes: Lifetime mortgages and other equity release options enable you to access the value of your home while remaining in the property. These financial instruments can provide additional income and are generally not contested by local authorities except under exceptional circumstances.

Purchasing Care Insurance: Acquiring an insurance policy tailored to cover care costs can provide a steadier income stream, potentially reducing reliance on means-tested local authority support. Premiums vary based on factors such as age and health status.

What is “Deprivation of Capital?

It involves situations where an individual intentionally disposes of or diminishes the value of their assets to reduce the amount they must contribute towards care costs. This can include actions like transferring money, property, or other assets to family members or into trusts. 

If the local council determines that the disposal of assets was deliberate to avoid care charges, they may treat the assets as notional capital. This means the individual is still considered to possess these assets for the purpose of financial assessments for care contributions. Importantly, there is no specific time limit on how far back the council can look to consider whether assets were deliberately deprived. It’s essential for individuals and their advisers to be aware of these rules to avoid potential complications when planning for future care needs. 

Additional Considerations

It’s important to account for potential tax implications, including Inheritance Tax and Capital Gains Tax, when planning asset protection connected with long-term care.

Final Thoughts

While a small percentage of seniors require residential care, for those concerned about future planning, these updated strategies provide various options to consider for protecting assets in 2024.

If you’re contemplating these choices, it’s crucial to seek personalized advice suited to your specific financial and familial circumstances. For further details or to discuss individual strategies, feel free to contact our advisors who are well-versed in the latest regulations and effective asset protection methods.