How To Reduce Assets For Aged Care?

Since a financial assessment is carried out when someone applies for a stay in an elderly care home, if a homeowner has other means of income or savings to fund their stay in a care home, there will be no need for their house to be sold. Otherwise, homeowners with empty homes are required to bear their care expenses through the sale of their homes. However, this is only applicable f their stay is permanent.

With care costs in the vicinity of £30 k to £40 k per year, per person, in some cases, it proves to be more feasible for homeowners especially those with little savings to stay in their own property and have a carer to look after them. In such cases, they may be able to claim certain state benefits including attendance allowance.

How To Reduce Assets For Aged Care?

If someone wishes to reduce their assets with the aim to reduce (or completely avoid) paying for their care home fees, they can use any of the following options:

Care Annuity: This is an insurance policy that helps to pay for long-term care home expenses.
Deferred payment schemes: These are schemes are offered by local authorities to serve as a convenient and flexible means to pay for long-term care home fees.
Equity release: This includes the release of equity in one’s home to pay for care home fees.
Rental income: This means to rent out one’s property with the aim to generate sufficient income to pay for care home fees,

Certain individuals choose to gift their property to their children in order to avoid its inclusion in their financial assessment for care home fees contribution. However, if this grant proves to be a deliberate act of reducing one’s assets to avoid paying care home fees, local council authorities can consider this as deprivation of assets and reclaim the assets.

Another option is to transfer your assets to a trust rather than an individual. In this case, there will be a group of individuals considered as a trust to whom the property’s ownership is entrusted with. While this is a feasible option in case of having a legal dependant or a minor who may benefit from the act, however, if it is used to simply avoid care home fees, there are many risks attached. It is advisable for claimants to seek professional financial advice prior to any decision regarding their property.

For a detailed understanding of the rules and regulations surrounding payment of care home fees and potential alternates for those who are low on savings or assets, let’s explore the following topics:

What Is An Assets And Income Assessment For Aged Care?
How Much Savings Can You Have Before You Have To Pay For Care?
How Much Can You Keep Before Paying For Care?
Who Pays Care Home Fees?
How Are Care Home Fees Paid For?
Can Council Take House To Pay For Care?

What Is An Assets And Income Assessment For Aged Care?

Assets and income assessment is a means-based test conducted by local councils to calculate the amount of care home fee that a claimant will be able to contribute considering their financial status, as the council will be bearing the remainder of the expenses. For this purpose, the income, savings and capital of the claimant will be taken into account.

State Benefits such as Attendance Allowance and Pension Credit will be counted as income. However, in the case of Disability Allowance, there will no accountability for the same.

Based upon the financial assessment of claimants, they will then be categorised into one of the following slots so that local authorities may decide upon the claimant’s contribution towards their care home fee as well as the amount due on the state:

If someone has savings over £ 23,250, the claimant will have to bear the entire cost of the care home fees
If someone has savings of £14,250–£23,250, the claimant will have to contribute most of their weekly income towards care home fees. They will also pay an assumed extra amount of £1 per £250 of capital that they have
If someone has savings below £14, 250, the claimant will not be required to pay for their care home fees from this amount and will have to pay from their weekly income.

How Much Savings Can You Have Before You Have To Pay For Care?

If you are a UK resident, the amount of savings you can have before having to contribute towards a care home fee depends on whether you live in England, Wales, Northern Ireland or Scotland. Below is the threshold for each country:

England: £23,250
Wales: £50,000
Northern Ireland: £23,250
Scotland: £28,750

Anyone who holds savings above this amount will have to contribute towards their care home fees until their savings fall below this threshold. When that homes, claimants will be able to receive financial aid from the state through their local councils.

How Much Can You Keep Before Paying For Care?

Claimants are permitted to keep a weekly allowance of £24.90 per week for themselves before paying for the care home fee. People who are on pension credit will be allowed an additional weekly amount of £5.75.

The good news for claimants is that according to a recent announcement by the UK Government, with effect October 2023 nobody will have to pay more than £ 86,000 as a care home fee. Once they have paid the amount, the remaining expense will be borne by the state and funded through their local council authorities.

Sometimes it is advisable for individuals on low income to consider their situation and make a decision whether they will be better off staying home and receiving care (as well as state benefits) or will they be taken care of better in a care home facility. In such cases, they may consider applying for Attendance Allowance or Personal Independence Payments.

Who Pays Care Home Fees?

Care costs are means-tested. This means that this is a decision taken after a detailed financial assessment of the eligible individual. If someone needs care but is unable to bear the expenses the council takes care of them.

Individuals living in care homes have the option of selling or renting out their unoccupied house to pay for their care home costs. However, if they have a partner or legal dependents living on the premises, the house will not be considered for care home costs.

If someone is not willing to sell their house, there is an option of Deferred Payment Agreement according to which the homeowner signs a formal agreement with their local council. The local council agrees to bear the entire care home expense of the claimant until they are ready to sell their house or the property is sold after the death of the claimant.

If you check your eligibility for the DPA scheme, below is a list of key criteria to be met:

your savings and capital are less than £23,250
you have no other funds to pay for care home expense
you are a homeowner or are able to offer any other asset as security
in case of your home serving as security, it must be unoccupied

How Are Care Home Fees Paid For?

Care home fees may be funded by either of the following means:

Self-funded
State-funded

In case of self-funded care home costs, the claimant either has income, savings or capital that contribute towards the expense or they may sell or rent out their house to pay for care home bills. Individuals on a low income, low savings or those claimants who do not own a property or those who may not be able to generate sufficient funds from the sale of their house may consider staying in their house and claim Attendance Allowance.

If the state is funding your care home fees, it will be routed through your local council and your benefits such as state pension and pension credit will be used to cover the costs. If you have capital below £23, 850, the state will bear most or in some cases all of your care home expenses.

For more funding options click here how to avoid selling your house for care home fees

Can Council Take House To Pay For Care?

No, the council will not forcefully claim your house to pay for care especially if it is in use of your spouse/partner or any qualifying dependant(s); which include the following:

spouse/civil partner/unmarried partner
a close relative over 60 years of age
a close relative below 16 years of age (legal dependant)
former spouse or partner if they are a single parent

Conclusion:

While reduction of assets is considered by many to avoid having to pay for care home fees, it is not the most advisable path to choose. There are other options such as deferred financial payments or renting of property to pay for care home fees.

Individuals who are low on savings or capital will be able to get help through state-funded schemes. However, there are certain conditions to be met depending on individual circumstances. Therefore, the best way to proceed further is under the advice of a financial advisor.

FAQs: How To Reduce Assets For Aged Care?

Can I avoid paying for care by giving away my assets?

While you may give away your assets with the intention to avoid paying care home fees, should this prove to be a deliberate reduction of finances, it will be termed as deprivation of assets. In this case, local councils may proceed with legal action such as reclaiming the assets.

Can I put my money in a trust to avoid care home fees?

Sometimes people opt to transfer their money into a trust to avoid having to pay care home fees. However, not all schemes are reliable enough for the purpose and there is no guarantee of the security of one’s finances.

What is the best way to protect your assets from nursing homes?

The best way to protect one’s assets from paying nursing home fees is to purchase a long term care insurance policy or start saving at an early age to make funds available in case of need.

Can I move money to avoid care costs?

If you move money to avoid having to pay care costs and local authorities find out, the amount will be recovered and you will be obligated to use it for care home bill payments.

How can I protect my elderly parents’ assets?

If the purpose is to prevent assets from being sold for care home fees, one can avail of a long term care insurance policy or maintain a savings account for the purpose.