3 minute read
Mayo Wynne Baxter
Planning ahead for care costs is not as straight forward as some may think. Independent advice may be required to tiptoe through the legal minefield, writes Fiona Dodd, Partner at Mayo Wynne Baxter
PLANNING FOR FUTURE CARE COSTS – TRAPS AND CONSIDERATIONS
Every parent wants to provide for their children, even when their children are grown up. It’s an instinct to try to pass on as much as possible on your death. Inheritance tax used to be the main worry, but successive governments have introduced changes to legislation which have removed much of the sting.
Attention has now turned to the cost of care, both in the home and in residential settings. Care costs can regularly reach £1,500 per week.
Many people see it as a tax on hard earned savings and investments in later life. It is not a tax. The cost is payable directly to the care home. The government feels that if you can afford to pay for your care, you should. There’s a safety net in that the local authority (LA) will pay if you are unable to do so yourself, like those who cannot afford a home, get council accommodation. There are strict capital limits. If you have more than £23,250 in capital, you will be required to pay the full cost of your care. Certain assets are disregarded such as property still occupied by your spouse, some insurance policies, and some pension income.
It’s tempting therefore to try to give everything away to family before entering a care home. However, this would not be effective. The LA will refuse to provide funding, even if your assets are below £23,250 if they believe that you’ve taken action to put assets beyond reach to avoid paying care fees, or when they feel it is foreseeable that you may need care in the not-too-distant future.
‘Action’ can be making gifts, going on a spending spree, putting assets into trust, or simply taking an expensive holiday. Not only can the LA refuse to pay for the care, but they have the power to seek to reclaim that money, or challenge trust arrangements. They can challenge actions taken many years before care is needed if they believe that the action was done to avoid care costs later in life. There is absolutely no time limit for a “safe” lifetime action, no matter what anyone may tell you.
Many couples who have children have a dilemma. As a spouse, they want to provide for each other, as a parent they want to pass as much as possible to their children. The dilemma is how to achieve both, or at least reach a decision they are happy with. If they leave everything to each other, then it may all go in care costs, but the survivor can choose the best care home. If they bypass each other, their children will inherit more, but the survivor may have to sacrifice some comfort for this.
There are ways of drafting Wills for couples to ensure that some, at least, of your assets are protected for your children, whilst still providing flexibility for the survivor to move home or spend their money as they see fit. This is a very complicated area of law and people do need to take specialist, experienced, impartial advice.
Whatever a couple decides, it is the fact of making an informed decision that is more important than the actual decision itself. Plus, it helps the children to know that whatever happens, their parents were prepared.
