The legalities of meeting the costs of residential care
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The prospect of not only growing older, but one day having to go into a care home, can be frightening. The cost of care, should it be required, can add to a sense of alarm.
People worry that they will be forced to sell their property and often plan to transfer ownership to a family member or to a trust to try to prevent it being sold to pay for the cost of care. While it’s understandable that individuals wish to protect their assets for the next generation, it is crucial to know that there is no guaranteed way to avoid paying for care in Scotland.
When someone enters residential care, their local authority carries out a financial assessment of income and capital in order to establish how much that person will contribute towards their care. This includes money in the bank, the value of their property and any shares or investments held.
As of April this year in Scotland, if the value of your capital is greater than £35,000 then you must pay for your own care home fees in full. If it’s between £21,500 and £35,000, you will make a contribution for your care. If your capital is lower than £21,500 the council will contribute to your care fees at your local council’s standard rate. If you choose a care home that charges above this rate, you will have to pay “top up fees” to cover the difference.
Importantly, your property is not included in this assessment if your spouse or partner lives in it.
Disposing of your assets before you enter care, particularly your house, can be risky from a legal perspective and may not actually reduce the value of your capital. Similarly, setting up a trust in lifetime may not achieve the protection you expect.
If you dispose of your assets or property before entering care, the council may consider that you have attempted to reduce your liability for care costs and, if it judges you have done so, can choose to include the value of the asset in its capital assessment. So while you no longer own the asset in question, you are treated as though you do when it comes to paying for care.
There is no time limit imposed on local authorities for investigating assets you have transferred or disposed of and there have been instances where the local authority have investigated transfers made more than 10 years before the person entered residential care. Local authorities have full discretion and there is no uniform approach to these investigations. Although it’s often not possible to avoid care home costs entirely, a much safer way to ensure your assets are protected is to get specialist advice from a solicitor to prepare a carefully-worded will which may include the use of a trust. Since individuals have freedom to dispose of their assets as they wish on death, this can be a more certain way of protecting certain assets for future generations.
Katherine MacPherson, Senior Solicitor.
