Taking Care of Your Future

from Worcestershire Now - FEBRUARY 2022

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Will you need to sell your home to pay for your future care? How can you fund any support you need without losing your home? What exactly are the changes to social care and what do they mean for older people living in Worcestershire?

Here, Sara Simson, Partner at Redditch law firm, FBC Manby Bowdler explains more about the reforms which will be made law in 2023 and why it’s more important than ever to start planning for your future care so you and your family are not left out of pocket.

So, what’s new? The Government recently announced changes to social care, which will come into effect in October 2023. The new regulations were meant to tackle unfairness in the way the social care system is funded, however, when you get into the details of the new legislation, it hasn’t really levelled the playing field at all.

Many people will still have to spend a lot of their own savings or sell their house to pay for their own care later in life, even with the introduction of the ‘care cap’.

The so-called ‘care cap’ is a big part of the social care reforms, and it is being introduced to put a limit on the amount anyone in England will need to spend on their personal care over their lifetime. The Government announced the £86,000 limit to put a stop to unpredictable and unlimited care costs and ensure that people who pay for their own care (self-funders) can access better value care but the ‘care cap’ is very misleading and that is why it has been debated a lot in parliament and in the press.

The ‘care cap’ small print The first thing to be aware of is that care is the only thing covered by the care cap. It covers the amount you will pay over your lifetime for the care you need but it doesn’t include your daily living costs such as food, utilities and any non-nursing care, should you move into a care home.

How might this affect you? Let us look at an example. If you are living with dementia in a care home, you may be paying care fees of £3,000 per month. However, when you look at the breakdown of those fees, it may be the case that only £1,000 of that invoice relates to the delivery of care and the other £2,000 is associated with daily living costs.

Therefore only £1,000 counts towards the care cap while the other £2,000 does not.

In fact, based on the average period of time someone stays in care and the difference between care costs and daily living costs, most care residents will never hit the £86,000 cap. So whilst you may not pay more than £86,000 towards your care, this doesn’t mean you will not pay more than £86,000 for your stay in a care home as a whole when the daily living costs are factored in.

Why is this important? Because the money you will be paying for your living costs (which can add a considerable amount onto the weekly cost of your care) will not be taken into account when the Government decides how much you should be contributing to your own care, and this could eat through any savings or assets you have very quickly.

The second thing you need to be mindful of is that in the guidance notes published in November 2021, it was confirmed that only payments that people make themselves from their own funds will count towards the cap. Any means-tested Local Authority funding you receive will not go towards the maximum amount you will be expected to contribute to your care costs.

Selling your home to pay for care When the social reforms were first introduced, the Government promised that nobody needing care should be forced to sell their home to pay for it but this is only partly true. The rules - as currently drafted - mean that no-one will have to sell their home to pay for care in their lifetime.

The reality is that if you do not have adequate funds to pay for your care in later life, and you don’t qualify for funding through the National Health Service or your Local Authority, you will not need to sell your home immediately. However, you may have to agree to give part of the proceeds of the future sale of your property to the Local Authority to fund your care. This is known as a Deferred Payment Agreement or DPA. Deferred Payment Agreements A DPA is essentially a loan agreement with your Local Authority who agree to pay your care costs upfront for you. The Local Authority will put a charge on your property for the costs they incur, and in the event of your death (or when your home is sold) they will recover their funds from the proceeds of sale, which of course greatly diminishes the inheritance you are leaving to your loved ones.

For a Local Authority to grant you a DPA, they need to be satisfied that your property is appropriately registered with the Land Registry and provides adequate security for the loan – i.e. they want to ensure they get their money back in full.

DPAs are subject to interest and administration fees, so it is best to get professional advice before you sign up to an agreement to understand the full costs involved.

If you agree to a DPA to pay for your care, the executors of your will should be told as there is often a time limit for the sale of your property after your death.

If you wanted to leave a house or property to your family in your will but agree to use it as collateral for your care through a DPA, all is not lost as there is the possibility they could keep it. To do this, the beneficiaries in your will would need to settle the debt with the Local Authority after you are gone. If this is done, the house or property could be retained.

Plan now! Despite the proposed reforms to make social care payment even across the board, we are still likely to see a generation of people who have saved all their lives unable to leave anything significant behind for their loved ones.

If you want to protect your assets from care fees in the future, it is best to take advice as soon as you can. With good planning, you can protect your assets and ensure you have something to pass on to your family. While no-one wants to think about getting old and needing care, putting off planning for your twilight years doesn’t benefit you or those you leave behind. n

If you would like to know more about how social care reforms will affect you contact Sara on 01527 588925 or email sara.simson@fbcmb.co.uk.