Cut Care Home Costs

The Community Care Act 1990 imposed liabilities to pay long-term care fees on those in care-homes who aren’t entirely looked after by local authorities. Those care home fees are, for most of us, a significant and unavoidable expense. For many residents (and/or their families) the costs of care homes are effectively unaffordable from cash reserves, forcing us to dip into the equity tied up in our homes with consequences for what is ultimately destined to be our legacy.

There are ways in which this depletion can be avoided, in certain circumstances, so that assets are entirely or largely preserved for those we love. 

Here I’ll explain just what the problems are, what the rules are, and what Goodwills can legitimately do to help.

WHEN GROWING OLD IS A GROWING PROBLEM

As I write in September 2019 the government is releasing new figures which show life expectancy in the UK is still rising, albeit at a slower pace. The Office for National Statistics predicts that between 2015 and 2025 we’ll have another 36% more people over 85 (up from 1.5 million to 2 million).

And of course, with modern medicines and palliative care, more people are surviving for longer but with cancer, Alzheimer’s, dementia, Creutzfeldt-Jakob disease, Huntington’s disease, Parkinson’s disease and other debilitating illnesses that require around-the-clock supervision.

Unfortunately circumstances often make it tough for families to provide that care in-house. So providers are sought. There is a price for this. And, with some providers going bust, there is a shortage of provision as well as a governmental acceptance that more public funds are going to have to be poured into resourcing far more facilities. Yet, for the foreseeable future, the onus is always going to be on jemmying cash out of the hands of the care home occupants and their families in the first instance, with local authorities being something of a last resort. 

CARE HOMES – SOME QUICK FACTS

If you read the findings of the Competition and Markets Authority report on care homes, as I have (and you can see a summary at www.gov.uk/government/publications/care-homes-market-study-summary-of-final-report/care-homes-market-study-summary-of-final-report), you will find the following quick facts (I have paraphrased):

• The UK care homes sector is worth around £15.9 billion pa
• Ca 5,500 providers look after ca 410,000 residents in 11,300 care homes (about 75 per provider and 36 per home)
• About 10% of residents are people with a primary health problem and they are sent to care homes by the NHS / Social Services
• Ca 95% of beds are provided by the independent sector (both for-profit and charitable providers)
• Local authorities generally commission care services from independent care providers
• In 2016 self-funders accounted for 41% of residents and they were paying ca £846 pw (ca £44,000 pa)
• In 2016 local authorities were paying ca £621 pw (ca £32,000 pa) for the other 49% though there were some top-ups (1/4 were partial funding).

Going to this resource – www.independentage.org/news-media/press-releases/cost-of-average-length-of-stay-a-residential-care-home-equivalent-to-26 – you will furthermore see that the CMA study doesn’t tell the whole story (especially about costs accelerating as needs increase over time):

• The average stay in a residential care home is 30 months (2½ years)
• The average cost for the 1^st year is £32,000
• That rises and for the first 30 months it averages £82,000
• Many residents (since the average stay is 30 months) pay much more than £82,000
• The cost of that average 30-month stay has been compared to the equivalent of over ¼ century’s family holidays.
  

LOCAL AUTHORITY RESPONSIBILITIES

Local authorities are directly responsible for care provision in their areas and have a legal duty to meet people’s ‘eligible needs’ subject to their financial circumstances. Importantly even if you get local authority funding nearly all income such as pensions is offset against that funding.

Yet if you have appreciable assets the local authorities will pay nothing. So residents will have to pay the full cost of their care in care homes themselves, for domiciliary care (in each person’s own home), or other types of care. And those costs are currently rising by a little more than 1% a year. But that are those limits, the cut-off points? Well, this depends on where you live. But they are if you have more than:

• £23,250 in England and Northern Ireland
• £26,500 in Scotland
• £30,000 in Wales

So only the last of one’s assets are normally protected. Otherwise they can and will be requisitioned to pay for care.

WHAT WE AT GOODWILLS CAN DO ABOUT THIS

The upshot of all of the above is that one can easily see assets that have taken a lifetime of hard work to accumulate being used hand-over-fist by local authorities to fund care that many would argue ought to be provided anyway by the state.

Asset preservation trusts can prevent such disasters. Because with them homes can be held in protective trusts where owners and their families retain control because a surviving spouse, any adult children and trusted relatives can be trustees.

Of course the circumstances are important. And sometimes there might be more than one smart solution. So I always advise people to pick up the phone and have a chat with Goodwills. We’ll be able to give some quick advice free-of-charge and then, if we agree it sounds like the basis of us working together to keep a home and assets intact for the sake of their owner and ultimately their intended beneficiaries, we can sit down together and hammer out a solution that makes great sense both financially and logistically.