Planning in your Will for care home fees

February 2012

The Government has published controversial plans to raise the proposed lifetime cap on care fee contributions, and those who wish to provide for care in retirement are being encouraged to take steps to protect their assets now. 

Funding for care home placements has been means tested since 1948, the principle being that those who can afford to pay should do so, with a safety net for those who do not have the means. 

Under the current system, anyone who requires care must pay all the fees out of their own money, unless and until they qualify under means testing. They only get benefits from the state to help with the fees when their capital has been reduced to £23,250. This system has been criticised for apparently penalising those who have saved for their old age, and because the longer an elderly relative lives, the less they have to pass on to their children. 

In 2011 the Government commissioned a report on the issue of long term care, chaired by the economist Andrew Dilnot.  The report proposed a lifetime cap of £35,000 on the contribution towards care, but it has since been widely reported that the Government is considering increasing the cap on home based and residential care services to £60,000.  This has been criticised by campaign groups like The Pensioners Convention. The final details will not be known until the White Paper on social care and a progress report on funding options is published in April, which is also expected to include an updating of the means testing criteria and limits. The capital limit is likely to rise also – with £100,000 currently being proposed.

The Government hopes the changes will encourage more people to take out insurance or other solutions to cope with a known maximum sum of care and residential home fees as part of their general financial planning strategy.  If they were then to require care, the insurance company would pay the fees up to the cap, after which the person would become entitled to state benefits to cover the ongoing costs.

Whatever the lifetime cap and the asset limit, with rising house prices the means testing could force some people to sell their home to fund fees.  But by planning in advance, there are circumstances in which at least part of the value of the family home can be ring fenced and kept out of the means testing equation.  This is particularly useful where remaining assets will be less than the limit. 

Tim Friedlander, private client expert with Aylesbury-based solicitors Parrott & Coales LLP said  : “In April the Department of Health is due to issue a White Paper on the future of social care and this will shed more light on what we can expect.  But no matter what comes out of that, there is much that we can all do to manage the risk.  Anyone with property should start with a well-drafted will, and one possibility is to put shares in the family home into trust.  This is a simple, safe and proven method of limiting one’s liability for residential home fees.

Currently most couples buy property as "joint tenants", which ensures that when one party dies, their share goes automatically to the other. But by changing their ownership of the property to "tenants in common", each party can leave their share to who they like, which opens the way to leaving their half of the house to their children, or, better still, to place it into a trust.  If this is done, half the value of the house will be ring-fenced if the surviving spouse needs nursing care.”