The Dilnot report: care funding

In July, the distinguished economist Andrew Dilnot published his report into the best way to fund care for people in old age. Partner Jenifer Gillman looks at the financial implications of nursing home costs and what that might mean in terms of arranging your affairs for the longer-term.

Recommendations

At the moment, a council will only fully fund care home places for those who are means-tested as having under £23,250 of capital assets. Dilnot recommends:

• that a person’s lifetime contributions towards his or her social care costs (currently potentially unlimited) should be capped at £35,000, after which they would be eligible for full state support

• that the means-tested threshold, above which people are liable for their full care costs, should rise from £23,250 to £100,000.

Even assuming the report’s recommendations are implemented, nothing will change on this front for several years. For now it will remain necessary to consider the effect of nursing home costs when looking ahead.

Act early

As with tax planning, there are ways to arrange one’s affairs more efficiently to try and protect one’s estate but it is vital to act early. You must act well in advance of needing care and be fit and healthy – a rule of thumb is that you should act by your sixties at  the latest.

The reason for this is the so-called ‘intentional deprivation of capital’ rule that makes up part of the Charging for Residential Accommodation Guide (or CRAG). CRAG governs the way local authorities are supposed to charge for care.

This rule can let a council treat an asset a care home resident has given away as still belonging to the resident, even if the gift was made years earlier.

It is unreasonable for a council to try to prove intentional deprivation if the resident dealt with his or her assets at a time when care was not foreseeable. However it seems likely that councils may be forced in future to interpret CRAG less generously.

Other options

Putting one’s house in trust might offer some advantages but it also has drawbacks and legal input here is essential.

It is sometimes forgotten that it is only the assets of the resident in care which are assessed. There can, therefore, be considerable benefit in the ownership of jointly-held assets being separated out. Again, particularly in relation to land, legal input can prove useful.