Long-term care funding – Part 2

This article ‘Long-term care funding part 2’ continues on from our previous blog posted last week ‘Long-term care funding – Part 1′.

Planning for long-term care

(a) Trusts

  • Putting money into an irrevocable trust is given as a possible example of deprivation at Paragraph 9 of Annex E of the Care and Support Statutory Guidance. The motive and timing of the gift will therefore be crucial factors in determining whether deliberate deprivation has taken place.
  • Where the resident is a beneficiary under a trust, the capital value of the trust fund will be taken into account only if the resident is absolutely entitled to it. The exception is where the trust fund derives from a personal injury award, in which case the capital value, as well as income from the trust, will be disregarded (unless the court has specifically identified the payment as being to cover the cost of providing care).

(b) Investment bonds

  • Paragraph 54 of Annex B of the Care and Support Statutory Guidance makes it clear that the surrender value of any life assurance policy must be disregarded as capital (provided there has not been deliberate deprivation).
  • Single premium investment bonds will usually be treated as policies of life assurance for these purposes although it should be noted that investment bonds with no element of life cover would not be disregarded and their full surrender value would be included as capital. It seems as long as the policy payment is dependent on human life, that is enough to make the policy a policy of life assurance for this purpose.
  • The treatment of investment bonds is markedly inconsistent with the treatment of other investments and savings, which would always be categorised as capital.
  • Using investment bonds also preserves choice – for example, if NHS funding is available or the client and their family decide it is more desirable to pay for care.

Recent developments

  • The Care Act 2014 includes measures for the reform of social care based on the recommendations made in 2011 by the Dilnot Commission. The measures, aimed at reducing the impact of care on accumulated wealth, include a cap on the total amount that a person will have to pay towards their own care and a substantially increased higher capital limit. Part one of the act, now in force, introduced the first of the reforms – a universal deferred payment arrangement and new national criteria to determine eligibility for care – in April 2015.
  • The £72,000 cap on care costs and increased higher capital limit of £118,000 will be introduced under part two of the act, which has been delayed until 2020. The delayed changes effectively mean that for the time being the funding and means-test system remain broadly similar to the previous system before the act was introduced. The current rules in how they apply to the treatment of life assurance investment bonds, trusts and deliberate deprivation of assets will remain unchanged.
  • We are also awaiting the publication of the social care green paper, originally due in summer 2017

If you have any current issues with care fees or would like to plan for the future, contact us, we are happy to help.

Ann-Marie Matthews is a solicitor in the private client team at Barker Gotelee, Ipswich Solicitors.

Suffolk Estate Planning Solicitors – for more information on our range of legal services, please call the team on 01473 611211 or email bg@barkergotelee.co.uk