Long-term care funding – Part 1
As advisers acting for elderly clients, we need to understand the issues related to long-term care funding – what counts towards capital limits and what assets will be disregarded. We also need to understand the deliberate deprivation rules and when a client is treated as having notional capital despite having given away assets or invested money into disregarded assets.
While the NHS will provide and/or pay for the nursing care component of a person’s long-term care needs, all other costs and services are the responsibility of the individual concerned unless they qualify for local authority assistance. Eligibility will be assessed in accordance with the National Assistance (Assessment of Resources) Regulations 1992, which is a means tested assessment.
The charging arrangements are reviewed annually and set out in the Care and Support Statutory Guidance, which supplements the Care and Support (Charging and Assessment of Resources) Regulations 2014, (which supersede the Charging for Residential Accommodation Guide). The guidance sets down the rules that a local authority must follow when applying the regulations and when deciding whether to include an asset in a financial assessment for long-term care or not.
The guidance provides for several important disregards including:
- capital below the lower capital limit
- Personal possessions
- The value of funds held in a personal injury trust
- The surrender value of a life assurance policy or annuity
- The value of a person’s main residence, if they have a dependant relative still living in the property. If this is not the case the value will be disregarded for 12 weeks.
Notional capital and deliberate deprivation
- Where an individual transfers an asset out of their possession to avoid or reduce the charge for accommodation, this may be treated as deliberate deprivation. Deprivation can occur in a number of ways including putting property into trust and reducing capital through extravagant living.
- However, for the action to amount to deliberate deprivation, the intention to avoid accommodation charges must be a significant part of the reason for acting in this way. Therefore the timing of the deprivation may be important evidence in establishing the motivation behind it, as case law has suggested that it would be “unreasonable for a local authority to decide that a resident had disposed of an asset in order to reduce his charge for accommodation when the disposal took place at a time when he was fit and healthy and could not have foreseen the need for a move” (Beeson v Dorset County Council ).
- Those found to have deliberately deprived themselves of capital will be treated as having notional capital equal to the value of the capital they have deliberately disposed of. If the notional capital, when added to the actual capital, exceeds the capital limit, the local authority may assess the resident as able to meet the full costs of care.
- Here, the local authority can recover any sums it consequently has to pay towards the resident’s care costs from the person to whom the asset was transferred (if relevant), as long as the deliberate deprivation occurred within six months of the resident approaching the local authority for funding. If the transfer was made earlier, the local authority cannot use this provision but may refuse funding or instead treat any assistance provided as an accruing debt.
- There is also scope for local authorities to make use of the Insolvency Act 1986 to pursue a debt of this kind on the basis that the transfer was carried out with the intention of defrauding existing or future creditors (although this is rare).
Click here to read Part 2 of this article.
Ann-Marie Matthews is a solicitor in the private client team at Barker Gotelee, Ipswich Solicitors.