Introduction to Best Practice
Whether the need for nursing home or residential care is expected
or not, families and carers, unfamiliar with the care system, need support
and help in making many difficult decisions. This applies equally to both those that are State supported and those who are self-funding their care.
The NHFA receives calls on a daily basis from families of
older people who, having sold their homes to pay for care, find that after
just a few years their money has depleted to the level where they need local authority funding. This can be a very
precarious situation because they have either having chosen a care home that
is inappropriate for their assessed needs or more expensive
than the local authority is prepared to pay for. Families find themselves in the uncomfortable
position of having taken responsibility for care home contracts
being unable to fulfil the commitment and needing to Top-up fees from their own pockets. The result is distress
and disharmony between social services, the care provider
and the family. At the centre of all this is the
older person in the vulnerable position of having lost their independence, dignity and right of choice.
This need not be the case.
There is often the emotional pull of on the one hand wanting to buy the best care possible but on the other not wishing to see an inheritance disappear. Combining advice on your full entitlement to State support with specialist financial advice to meet the cost of care can be a solution that satisfies both. It’s really sad that so few people investigate this route. Without such advice many people just put their money on deposit and find themselves in the difficult situation described above.
Best practice from all involved when older people need to move into care homes should include:
- Having a formal care assessment from the local social services department when the need for care arises . This will avoid individuals
choosing accommodation that may not be suitable for their assessed
needs if at some time in the future they
need to rely on local authority funding.
- Ensuring the individual or someone close is capable of making an
informed choice of appropriate long-term accommodation.
- Advice on benefit issues for example the ability
to claim attendance allowance, and understanding what local authority or NHS funding might be available even if self-funding care.
- Considering the ability to meet the cost of chosen care,
not just in the immediate future but over the long term. Bearing in
mind
that care costs may increase with dependency.
- Being aware of the consequences of running out of
money. Whether the local authority would be prepared to
take up the contract. In particular the future possibility
of requiring a third party to top-up if
capital were to fall below the means test threshold. Families
should be advised to discuss the consequences of no longer
being able to afford a full fee with their chosen care provider.
- Advice on the best ways to pay for care from a qualified specialist care fees adviser who will:
Review entitlements to means tested and non-means tested DWP benefits.
Advise on local authority charging procedures and health authority responsibilities and funding.
Provide guidance on choosing suitable accommodation.
Consider what legislative matters should be attended to, for example setting up enduring powers of attorney.
Advise on care home contracts, fee negotiations and arranging fee enhancement agreements.
Consider life expectancy and the ability to meet care costs over the long-term.Investigate the cost of immediate need care fee payment plans to potentially cap the cost of care.
Advise on how best to arrange finances with the aim of enabling the full cost of care to be met for life.
Monitor care fee payment plans and investments for suitability as care needs change.
The careful planning and structuring of a care home residents' affairs
will benefit all involved:
Care home residents benefit by receiving their chosen care without feeling
a burden on the local authority or the family.
The family as a whole benefit because any financial and legal worries
are taken care of. They have peace of mind that their relative can afford
their care and will not run out of money. (Although it may not always
be a priority, unlike many older people today it is possible to achieve
the situation whereby the longer clients enjoy their stay in care homes
the more money they will be able to leave their children).
The care provider is happy in the knowledge that he will continue to
receive a full fee for the duration of the resident's stay, which must
inevitably enable standards to be maintained.
Social services benefit because their limited funding will never be
called on and can be utilised to provide placements for the most needy
of cases.
Residential and Nursing Home Care... Who Pays for What?
The majority of people requiring long term care
will continue to be means tested and their families will continue
to have to contend with the complex system of obtaining and
paying for care. The NHFA who specialise in providing financial
advice for people who need long-term care have produced a
number of information sheets which provide detailed information
on many of the common problems people encounter when the need
for care arises. These are referred to below as we look at
some commonly asked questions.
Do you need care?
If you or you consider a friend or relative is in need of care you can
ask the social services to carry out what is called a section 47 assessment
of your needs. Once informed that somebody may need care the authority,
often jointly with the health authority or GP, has a duty to carry out
an assessment. This may reveal that you need care at home or in a residential
setting.
Infosheet 3 'The Legal Framework' Click here to order your free Infosheet
Do I have to pay for my care?
Unfortunately the concept of free care from cradle to grave does not
apply to long term care provided through the social services. If you
need care at home you may be asked to contribute towards the cost if
it is considered you can afford it. There are no set rules for calculating
your contribution. If you need care in a nursing or residential care
home you will have to undergo a financial assessment which does have
set rules for means testing whether or not you qualify for state assistance.
NHFA Infosheet 4 'Local Authority Charging
Procedures' Click here to
order your free Infosheet
How does this means test work?
If you have capital of below £21,500 you may be entitled
to some assistance from the state towards your care costs.
First your Social Services Department will carry out an assessment
of your care needs under section 47 of the NHS Community Care
Act 1990. If you are assessed as needing nursing home or residential
care you will be asked to claim any benefits you may be entitled
to and these will be taken into account in a means test to
ascertain how much you can afford to pay. Normally you will
have to pay all your income towards the fees less £20.45
per week you must retain for personal expenses. If you have
capital of below £13,000 you will receive the maximum
help. If you have capital of between £13,000 and £21,500
you will also have to make a capital contribution of £1
for each £250 of capital between these two figures.
A Typical Case Study
Mrs Smith is 82 years old, has been assessed as needing a
place in a care home costing £400 per week in a private
home. She has savings of £11,000 and a state pension
of £82.30 per week.
| Nursing Home
Fees |
|
400.00
|
| Pension
and Pension Credit |
119.05
|
|
| Less -
personal expenses allowance |
20.45
|
|
| Mrs Smith's
contribution |
|
98.60
|
| Balance paid
by the Local Authority |
|
£301.40
|
|
What is the personal expenses allowance?
This is the fixed amount of money (currently £20.45
per week) you must be allowed to keep for your personal expenses.
It cannot be used to top-up care fees. It is not a lot of
money for those little extras which you may have to do without
if you need a haircut.
Is the value of
my home taken into account?
The value of your home will be disregarded for the first
12 weeks of you requiring permanent residential or nursing
home care. It will then be treated as capital and is only
disregarded if your partner or, a relative who is aged over
60 or incapacitated or a child aged under 16 years who you
are liable to maintain, or a previous partner from
who you are separated and is a lone parent occupies it. There
is also a discretion to ignore property if it is occupied
by someone who gave up their home to be a carer.
Do
I have to pay council tax on an empty property?
If you move into a care home and your property is left empty
then you should receive full exemption from Council Tax until
it's sold.
What
if it is jointly owned by somebody other than my partner?
Because the value taken into account should be the market value and
it could be impossible to find an outsider to be a willing buyer for
a share of a jointly owned property, It could be argued that in these
circumstances the capital value is nil.
Can
I give my home away to avoid the cost of care?
This is not recommended. Consider the consequences of the recipient
undergoing divorce proceedings, insolvency or defaulting on borrowing
against the property. In any event the authorities can go back as far
as they wish when considering whether a property has been given away
to avoid care costs. Consider also that if you did get away with it your
choice of care would be restricted to what the local authority could
afford which may not be that you would otherwise choose if you were independent.
NHFA Infosheet 5 'Deprivation of Assets' Click here to order your free
Infosheet
Will the Social Services pay my fees whilst I am selling the property?
Yes, if you have other capital of below £21,500, there
is provision for the Local Authority to ignore the value of
your property for the first twelve weeks of permanent
residence in a care home and assist you with the costs.You
will be expected to contribute all your income towards the
care home costs except £20.45 per week retained for
personal expenses. Beyond the 12 week period any money that
Social Services lay out on your behalf will form a charge
against the property and be recovered from the eventual sale
proceeds. You will be able to claim Pension Credit with Attendance
Allowance during this 'loan' period, however, if the property
is not on the market to be sold, the DWP may treat it as capital
and, subject to its value, could effect entitlement to Pension
Credit..
NHFA Infosheet 2 'Treatment of Property' Click here to order your free
Infosheet
My partner needs care.
How does this effect me?
The social services only have the right to means test the
member of a couple whom requires the care. In which case they
will take into account any capital they own and all their
income. However, property occupied by a partner is disregarded
and fifty percent of any private pension must be returned
to the partner at home. Local authorities used to ask a married
partner remaining at home to contribute towards his or her
spouses care costs if they felt they could afford it. This is
called a liable relatives' contribution however from April 2006 councils have been given extra money by government so that they do not have to apply this rule.
Money
tip where couples have joint savings...
In assessing entitlement to financial assistance, the DWP
and local authority will take into account joint savings with
a spouse and, until those joint savings fall to £43,000,
no financial help is available (i.e. ½ of £43,000=
£21,500 capital limit).
Those who are paying for their accommodation from joint savings with
a spouse at home, should split their accounts into separate
single accounts immediately to benefit from state assistance
as early as possible, i.e.
| |
£ |
|
£ |
£ |
Account
balance |
60,000 |
50% |
30,000 |
30,000 |
| |
|
|
|
|
Care
fees
payable |
17,000 |
|
8,500 |
- |
| |
|
|
|
|
| |
43,000 |
|
£21,500 |
£30,000 |
| |
|
|
|
|
Divided
by ½ = |
21,500 |
|
|
|
| |
|
|
|
|
| |
Resident
eligible to state assistance after £17,000
paid |
|
Resident
eligible to state assistance after £8,500
paid
(saving of £8,500) |
|
|
What if we both need care?
Again, it is important to remember that members of a couple must be
financially assessed separately and each required to contribute according
to their individual resources.
NHFA Infosheet 7 'Treatment
of Couples'
If the state is paying do I
have a choice of care home?
Yes you do. You can choose a state home, a private home or
one owned by a charity. It does not have to be in the same
county as your local authority so if you wish to move to be
near friends or relatives you can do so. There are conditions.
The home you choose must be suitable for your assessed needs,
it must comply with any terms and conditions set by the authority
and, often the stumbling block, it must not cost any more
than the local authority would usually pay for someone with
your assessed needs.
NHFA Infosheet 1 'Issues Surrounding Choice' Click here to order your
free Infosheet
What if the home does cost more than the local authority are prepared
to pay for?
You will be permitted to top-up your fees during the temporary
disregard of your property period or whilst your property
is on the market as long as the value of this and other capital
exceeds £21,500. If the local authority is funding your
care they will allow a top-up from a third party who is able
and willing to do so over the long term. You are not allowed
to top-up the fees yourself from your remaining £21,500.
Are their any benefits I can claim that are not means tested?
If you are self funding, Attendance Allowance
is a non-means tested, non-taxable allowance paid at the lower
rate of £43.15 for those needing care by day or night
and, at a higher rate of £64.50 for those needing care
by day and night. Also, whether your stay is temporary
or permanent if you receive nursing care in a care home you
may be entitled to an NHS Nursing Care Contribution
towards registered nurse time costs. There are three
dependency bands. Low paying £40 per week, moderate
£87 per week and high £139 per week. If you need
primarily health care, you may be entitled to full funding
from your local Primary Care Trust under their continuing
care eligibility criteria.
The above applies to England only. Wales, Northern Ireland
and Scotland pay different amounts.
What happens if after I have moved into a care home independently I
run out of money?
Once your capital reduces to £21,500 you can seek assistance
from the local authority. However, you may find you have chosen
a care home which costs more than the local authority is prepared
to pay. For example, if the home you chose independently charges
£400 per week you may find the local authority will
only pay £340 per week. Families can find themselves
in the precarious situation of having taken responsibility
for care home contracts for full fees and unable to fulfil
the commitment. The problem you have is then either to find
a source of top-up, ask the home to reduce their fees or move
to cheaper accommodation which could be detrimental to an
older person's health and well being. The result is distress
and disharmony between social services, the care provider
and the family. At the centre of all this is the vulnerable
older person left in a situation that can hardly be described
as dignified.
What
can I do to avoid this situation?
It is important to seek specialist advice when moving into a care home.
If on examination of your finances it is likely that you will run out
of money you should discuss this matter with the social services department
to make sure they will step into help. You should also discuss the matter
with the care home owner to obtain the reassurance that you can remain
in your chosen accommodation at social services funding rates. This need
not be the case.
There are ways in which care costs can be met and money can be left
for your children
NHFA research found that over 90% of older people who sold their properties
to meet care costs left their money on deposit. Consequently, in a climate
of low interest rates, many older people run out of money long before
their need for care ceases. With that loss often goes the independence,
dignity and right of choice they deserve at perhaps the most vulnerable
time of their life.
The worry of paying for care may be alleviated with the help
of a specialist care fees adviser who will consider the most
suitable financial plans to meet individual needs, look at
entitlement to local authority support, the health authority's
responsibilities and DWP benefits, tax efficiency and legislative
arrangements. Ideal financial products are those that can
provide a regular income and incorporate flexibility to meet
any future changes in care needs. These could be fee increases
or the additional cost of moving from residential to nursing
home care. The ultimate aim in financial planning for care
home residents must be to enable care costs to be met for
life whilst, as far as possible, preserving their original
capital.
The financial products that lend themselves to these criteria
vary according to the older person's age, health, required
income and the degree of risk a family is prepared to take.
Many plans invariably produce returns significantly above
those provided by deposit based savings. Whilst interest rates
remain low, leaving monies in Banks or Building Societies
is rarely a suitable option for meeting care costs. One alternative
is specially designed Care Fee Payment Plans.
These schemes offer a higher level of guaranteed income for
life and greater tax advantages than can usually be provided
by traditional investments or annuities. Furthermore, they
often require only part of the capital to be used to meet
care costs allowing the remainder to be invested for growth
and provide for an inheritance.
In principle, for a capital sum, these plans aim to provide increasing
payments for life covering the shortfall between income and care costs.
Their price is subject to medical underwriting and, unlike any other
form of life or health insurance, the more impaired the life the lower
the cost. The security these plans offer gives the reassurance that care
costs can be met for life regardless of any changes to the economy, interest
rates or stock markets. Partial capital protection can be included although
standard plans do not normally provide for return of capital on death.
The sensitivity therefore of judging when care fee plans are suitable
cannot be over estimated. Families must consider the possible short-term
loss of capital against the peace-of-mind factor and longer-term benefits
should their relatives survive in care.
Case Study:
Mrs. Smith is 80 years old, having suffered a stroke needs nursing home
care. The capital from selling her house is £75,000 and she has
an income totaling £555 per month. A home has been chosen where
the fees are £400 per week (£1,733 per month). This leaves
a monthly shortfall of £1,178 to be met from her capital.
A Care Fees Payment plan providing £1,178 monthly to
include spending money, rising by 5% per annum for life, nil
capital protection will meet the monthly shortfall and could
cost approximately £30,000. Her remaining capital of
£45,000 invested primarily for growth, if achieving
7.5% per annum, would have grown to approximately £64,600
after five years. Unlike many older people paying for care
today the longer Mrs. Smith enjoys her stay in the care home
the more money she will be able to leave for her family. This
can be illustrated as follows:-
| Income
per month |
£555 |
£555 |
| Deposit
Interest (average) |
£202 |
- |
| Care
Fee Plan Income |
- |
£1,178 |
| Total
Monthly Income |
£757 |
£1,733 |
| Cost
of Care |
£1,733 |
£1,733 |
| Monthly
Shortfall in Income |
£976 |
NIL |
| |
|
|
| Effect
on Capital |
|
|
| Capital
remaining after three years |
£34,600 |
£50,450 |
| Capital
remaining after five years |
*£12,750 |
£64,600 |
| (*assuming
state assistance in payment)
|
|
Other suitable financial products for meeting care costs will depend
on individual circumstances and one's view on investment and risk. High
Income Investment Trusts could be one option or, Investment Bonds and
ISAs may provide a greater return than leaving money on deposit as well
as being able to facilitate regular withdrawals.
Investment Bonds also have the advantage of providing an enhanced surrender
value on death, normally 101% of the fund value. However,
these forms of investment are rarely guaranteed and the financial
and legal implications to be considered when paying for care
require careful planning. Older people and their families
are therefore advised to seek professional advice before taking
on any commitment they are unsure of being able to afford
over the long-term.
NHFA Infosheet 6 'Immediate Care Plan
Case Studies' Click here to order
your free Infosheet
Further advice on paying for care and copies of the NHFA Long
Term Care Guide and Infosheets can be obtained from:
NHFA
St Leonards House
Mill Street
Eynsham
Oxford
OX29 4JX
or using our Freepost address:
NHFA
FREEPOST SCE12765
Eynsham
WITNEY
OX29
4BR
|
