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Moving into a care home can be very expensive and many people are forced to sell their home to pay for their care.
You can get help with paying for your care from your local authority but this is means-tested and your savings and any property you own will be taken into account when determining your eligibility.
It is not surprising then that some companies offer advice on how to avoid paying for care.
However Jane Sutherland, partner and solicitor at East Midlands-based Nelsons Solicitors, warns that you must seek sound legal advice before handing over any money to these schemes.
Are these schemes the next mis-selling scandal?
“Fuelled by concerns over the so-called ‘dementia tax’, a whole industry has grown up around the sale of these schemes, with charges often starting at around £4,000. All too often the schemes may be promoted by people who are not legally qualified and who are giving information without first considering whether it is appropriate for the client.”
How do the schemes work?
“These schemes work by allowing you to gift ownership of your home during your lifetime into a trust. The trust will give you the legal right to live in your property rent free for as long as you like, but if at some stage you no longer want to remain there – perhaps because you’re moving into care – your home can be sold and your trustees can decide how to deal with the sale proceeds.
“Your trustees, who could be your children, will be guided by a letter of wishes made by you, which could, for example, ask that the sale proceeds be kept in trust while you are alive but then be divided equally between your children after your death.
“There is absolutely nothing wrong with this in principle and there can be many good reasons for putting such arrangements in place. However, before you put your home in trust, you must understand what is involved and what the implications would be if you were to go into care in the future.”
Care costs and funding
“In truth, most people don’t go into care. Less than 15 per cent of people aged 85 and over live in residential care, and of those who do, the average length of stay is 2.3 years in a residential care home and 1.4 years in a nursing home. In the East Midlands the average annual cost is currently £30,056 for a residential care home and £37,700 for a nursing care home.
“If you do have to move into care, you may qualify for NHS funded continuing care and if so, the NHS will pay all of your care costs. If you don’t qualify, then you will have to fund your own care fees, firstly from your income.
“If your income won’t cover your care fees in full then you will have to pay the shortfall from your capital (e.g. your house, savings and investments) until this falls to below certain limits.
“If you have capital of more than £23,250 then you have to pay in full. Once your capital drops below £23,250, you will pay a contribution until your capital decreases to £14,250, at which point the local authority will fund the shortfall between your care fees and your income in full up to local limits. If your house is occupied by your spouse or certain others it will not be included as part of your capital.”
What happens if you go into care when your house is in trust?
“If you had put your property into trust before going into care, then the starting point is that it is no longer owned by you. Your home is not part of your capital and you cannot be required to use it to fund your care fees.
“Although trust schemes can work, their effectiveness cannot be guaranteed. Your local authority can challenge your exemption from paying care fees – for example if it can show that a significant reason for you putting your property into trust was to avoid care costs and, at the time you did it, you had a reasonable expectation that you’d need care in the future. Local authority guidance does say, however, that it would be unreasonable for the council to reach this conclusion if you were fit and healthy when you transferred the property.
“Whether such arrangements, even if they are not challenged, are likely to be of real benefit to you in practice will depend upon your individual circumstances. Your income might be enough to pay most or all of your care fees anyway. It may be that the level of your other capital is sufficient to cover the shortfall between your income and care fees for the likely length of your stay in care.”
Why should you consult a solicitor?
“This is a very complex area of law – there are many factors to consider – and it’s highly recommended that you consult a solicitor with experience and expertise in this field. They should look at your particular family, health and financial situation and advise you as an individual.
“This advice should be backed up in a written report and you should then be given time to consider whether and how you wish to proceed. Schemes which claim to give guaranteed protection to protect your home from care fees which sound too good to be true, may well be just that.”
For more information visit www.nelsonslaw.co.uk