The new cap on care costs – what does it mean?
This month, the Government announced a national insurance levy of 1.25%, and a new cap of £86,000 will apply to care fees from 2023. This is welcome news for those concerned about leaving an inheritance to their children but are worried about their estate being swallowed up by future care costs. However, these changes bring questions; how will it work? And, if you choose a more pricey residential home, will you receive funded care sooner and at a higher price than someone in a cheaper home?
What is the new cap?
As the new cap has only just been announced, a lot of questions will not be answered for some time. However, we can look to the statutory guidance published in 2015, when the Care Act 2014 came into effect. In the 2014 Act, a care fee cap of £72,000 was due to be introduced but was scrapped. So, how would this cap have worked, and what could the new cap look like?
Section 15 of the Care Act placed a limit of £72,000 on the amount an adult would have had to pay towards their eligible care costs, during their lifetime. This means that once that cap was reached, they would no longer have to contribute towards the cost of their eligible care. This cap would have come into effect for care provided at home as well as residential care, while an adult’s eligible care needs would have been determined by a Care and Needs Assessment.
However, when the cap is reached, would have been determined by how much your local authority would pay for that eligible care that you are receiving. Therefore, if the local authority would have expected to pay £500 a week for your care but you were being charged £800 a week, as a privately funded individual, then the £72,000 cap would not have been reached until 144 weeks of care had been provided. Due to their bargaining power, local authorities have access to cheaper care.
In addition, if a proportion of the fees you paid were attributable to daily living costs including accommodation, then you would still have to meet these costs when the care cap had been reached.
So, in reality, an adult paying for their care would have paid substantially more than £72,000 for their care before reaching the care cap. They would have also been expected to continue paying a proportion of their fees for their accommodation, even after the cap had been reached. The new £86,000 fee cap is likely to work in a similar way.
Can I put my house in trust to my children to avoid care fees?
When an adult requires care and are close to the threshold below which care is funded, they will be assessed by the local authority. This assessment decides whether they are able to receive funded care and if they are to contribute to the care they receive.
The local authority has certain anti-avoidance powers at its disposal. This includes a power to disregard gifts and disposals of assets that have been made with the primary intention of reducing liability for care fees. For example, if you gift a substantial asset (such as your main residence) to your children, either in trust or as an outright gift, and the local authority can show that the primary intention of doing so was to avoid care fee liability, then they can include the value of that asset in your financial assessment.
As well as the risk that the local authority can disregard any gift such as this, transferring your property to others carries other disadvantages that come with no longer owning the property. These could include not being able to mortgage it, make home improvements, or sell the property without consent.
So, what can I do?
Which measures you can safely take will depend on your individual circumstances. To receive personalised advice, speak to our expert Wills Team today to discuss your situation. You can reach us on 01525 378177 or via our contact form.