Funding care fees. A dilemma without a rehearsal

01 July 2020

I was recently approached by a friend (Emma) enquiring into the options of paying for care home fees for her 90 year old father (Peter), a widower, who has dementia and couldn’t live at home safely anymore.  Emma inherited her mother’s half of the property and is a tenant in common with her father. She has Lasting power of attorney (LPA) for her father as he has lost mental capacity.

This is a dilemma that many must face but it is always worth reiterating the thought processes.

Peter had an assessment of his needs done by the Local Authority Social Services which showed that he could not look after himself properly anymore. It was decided that the best solution was for him was to go into a local care home that he knew and would meet his needs. Following the care assessment Peter had an assessment of his finances by the Local Authority which showed that he had savings of less than £23,250. In this situation the local authority agreed to offer Peter a deferred loan against his half of the property until his share of the property sold.

Acting upon the recommendations of the Local Authority care assessment, Peter entered the local care home. As he had capital of less than the upper limits for his area of the UK and had been assessed as needing permanent care, the value of his home was disregarded for 12 weeks. This decision means that the local authority will not take Peter’s income into account apart from a small amount known as a personal expenses allowance which he keeps for his personal needs. After 12 weeks Peter has a Deferred Loan agreement in place with the Local Authority secured by a charge on the property. This will now provide the funds to pay for his care.

However, once the property is sold, he will be “self-funding” and the loan will be repaid. He will then face a total monthly care home fee bill of £2,600. He receives Attendance Allowance payable at highest rate (of about £386 per month) and his various pensions which when added together makes a shortfall in his income  over the cost of his care of just under £1,200 per month.

https://www.thenationalcareline.org/FundingCare/PayingForCare

Emma had engaged the family solicitor to argue that the Local Authorities valuation of the property was high and, also didn’t truly reflect the ownership situation. A lowering of the valuation would reduce Peter’s net worth and his ability to fund his care from his half of the property.

With the legal negotiations going on in the background, Emma was keen to examine various ways of funding for the fee shortfall, obviously wanting to do the best for her father as a daughter and also her duty as attorney.

The Local Authority Support Thresholds in England are £23,250 to £14,250 and Peter has capital of £21,000. As his available capital is below the upper limits but above the lower limits, he will be entitled to some support but £1 per week must be paid to the local authority for every £250 of assets above the lower limits. 

The property, is an obvious source of cash or income. A lettings agent estimated it would generate about £800 per month less costs, half of which is strictly speaking Emma’s, and also assuming it was modernized, the house hadn’t really been touched since the 1980’s so would need a major upgrade and expense even unfurnished .

This would mean Equity Release would not be possible and selling the property looked like the most viable option. The property is valued at £120,000 in its current state. 

https://www.thenationalcareline.org/FundingCare/EquityReleaseAndCare

Emma knew that you could insure against longevity with an immediate care needs annuity and deferred care cost cover, but this wasn’t possible to do due to lack of capital for the premium.   At that time Peter’s health took a turn for the worst so the concept parting with a lump sum to provide a secure income, despite premium protection safeguards, suddenly didn’t look so palatable to Emma.

And then COVID 19 has intervened, Peter being in a care home could be at serious risk of being infected, again a deterrent for insuring against longevity. 

Thankfully Peter’s health has improved and the Care home he is in has been isolated against the virus until very recently. The pandemic has however, had an effect on slowing down the legal proceedings, with property valuations being postponed and delayed.

So although this case is still unresolved what can be learned?

• Fortunately, Peter already had an LPA in place, so it has made it easier for someone to immediately act on his behalf. https://www.thenationalcareline.org/PlanningAhead/ManagingSomeonesMoney

• But Emma having power of attorney has led to its own conflicts over the property when Emma’s interests do not coincide with those of her father’s and her duties as attorney. Is Emma in this instance the best person to be the attorney?

• Emma did not automatically accept the Local authority’s valuation of the property. Local Authorities, understandably, will try and reduce their costs with financial assessments that are most beneficial to themselves.

• Emma did engage her family solicitor, but initially was not confident in their experience in the care fee funding minefield. She sought legal advice and further specialist help via The National Careline.  https://www.thenationalcareline.org  and her solicitor is working in tandem with the care fees planning specialist to find the right solution for all.

Conclusion

People must ensure to plan ahead, make sure a Lasting Power of Attorney is in place and that Wills have been done.  Do not leave it too late and end up having decisions made for you that you do not  want. If you want to retain power over what is to happen if you become unable to make decisions, you must ensure that your wishes are written down in a legal document that others must follow.

Financing of care fees is a specialist area, whether using the value of a property or not. There are various products and solutions all with their pros and cons and one solution doesn’t suit everyone. It is important to seek specialist financial advisers who are qualified in this area so that all options are considered and that the best solution for the person needing care is reached.