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Can you answer the £86,000 care costs question?

For a brief moment, it seemed that one of life’s toughest financial puzzles was about to be solved. 

It was 7 September 2021 and the government had announced plans to introduce a cap of £86,000 on the total care fees anyone would pay over their lifetime, with the state paying the rest. 

The cap was scheduled for 2023, and from day one it was surrounded by questions over how it would be funded and whether it would apply beyond England. 

All of which means that if you’re planning your retirement or your inheritance, you can no longer bury your head in the sand about care costs. 

Here, we explain how much you are likely to pay, if you're eligible for funding and whether you'll need to sell your home to fund it. 

How much you're likely to pay

As a report on care homes by research firm LaingBuisson notes, fees have outpaced inflation for two decades, and, despite moves to use technology to cut costs, ‘the sector will probably look much the same in 10 years’.

For a typical residential care home, the average weekly cost is £1,402. But if you need nursing dementia care, the most intensive type of care, it's £1,597 a week, and this can vary further by region: 

Worse still, there’s a growing gap between the fees councils pay to care homes, accounting for 57% of residents, and what ‘self-funders’ pay. 

With councils under pressure to pay less, self-funders are making up the shortfall.

Find out more: 

Are you too wealthy for council funding?

Even if you suspect that you’ll need to pay care home fees yourself, contact your local authority for a free needs and financial assessment. 

The needs assessment could end up suggesting a solution other than going into a care home, such as equipment and changes to your home. It’s also the gateway to NHS funding. 

The financial assessment decides if you’ll get financial support from the local authority, based on whether your wealth exceeds capital limits:

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Above the upper limit, you’ll get no funding; below the lower limit, you’ll get full funding.

 Even if you qualify for council funding, you’ll still need to contribute to care costs from your income – if you have a pension, for example – and the council will pay for the rest. Friends and family can pay top-up fees to enable you to access pricier care homes than those on the council’s list.

You may fall between the two limits (except in Wales, where there’s only an upper limit). For every £250 you have above the lower threshold, you’ll be treated as if you earn £1 a week ‘tariff income’, money that the council will expect you to contribute to your care. For those self-funding, coming up with an exact bill is complex. 

It may be more helpful to compare your weekly income with weekly costs, to estimate how quickly you’ll need to dig into your savings. 

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Will you have to sell your home?

If you own property, it’s likely to be worth far more than the upper capital limits, blocking you from funding. 

But in some cases the council can’t count your home as part of your capital, for example if your spouse or partner still lives in your home. This also applies to a divorced or separated partner, a relative aged 60 or over, a child of yours who’s aged under 18 or ‘incapacitated’ (generally defined by access to various disability benefits). 

Your home is also disregarded for temporary stays in care homes and for the first 12 weeks after it’s decided your stay will be permanent.

The deliberate deprivation estate-planning trap

Catriona Smith, an independent financial adviser at Chase De Vere who specialises in later life planning, says that ‘the timing of the gift is usually more relevant than the type of gift which is made’. The healthier you are, the less you could have reasonably expected to need care.

Some gifts are less likely to be considered deprivation of assets, such as giving wedding presents and gifts from surplus income. Keep records to prove these gifts are ongoing and didn’t affect your standard of living.

However, Smith sees transferring ownership of your home as ‘a high-risk strategy which could have wider ranging personal or financial implications’, with fallings out, divorces and bankruptcy causing complications. If you continue living in your home, you’ll be expected to pay rent at a market rate.

Planning ahead is crucial, but Smith warns against confusing tax and care rules. While no inheritance tax applies to gifts made more than seven years before your death, local authorities can investigate any gifts you’ve made, regardless of when you made them.

With estate planning and care cost planning so intertwined, consider speaking to a financial adviser. Look for one accredited by the Society of Later Life Advisers (Solla) and who has a CF8 qualification from the Chartered Insurance Institute.

Find out more:

Don’t bet on the NHS paying for your care

In theory, the NHS will pay for your care, regardless of your wealth, if you have long-term and complex health needs. You don’t have to move into a care home; instead funding could be used to get care provided in your own home. 

The application involves two assessments by healthcare professionals, and your eligibility is reviewed annually, so funding could be cut.

The chances of getting NHS CHC funding are slim and vary significantly depending on where you live. Between 1 January and 31 March 2024, just 21% of applicants were deemed eligible. This ranged from 7.4% in Gloucestershire to 42.5% in Leicester, Leicestershire and Rutland.

Even if you’re deemed ineligible for NHS CHC, assessors could still decide you need NHS-funded nursing care. This is a contribution of £235.88 a week towards a registered nurse’s services, regardless of how you pay for the rest of your care.

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source https://www.which.co.uk/news/article/can-you-answer-the-86000-care-costs-question-a22V29R4a43I
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