An expert on social care believes the Tories’ care proposals could leave Local Authorities millions in debt. Luke Clements, Professor of Law and Social Justice at Leeds University, believes that Councils will have to demand extra funding from the Treasury to cover the cost of allowing care fees to be deferred until death. Professor Clements also believes Councils could incur large legal bills in chasing families for the deferred payments. These additional costs would be better spent on improving care.
In his report The Conservative Manifesto and Social Care, Professor Clements states:
“In financial terms local authorities will take a cash flow ‘hit’ as many individuals will be able to (and will be advised to) opt for a deferred payment. Local authorities will need a significant cash injection from the Treasury to cover this ‘hit’: cash that will do nothing whatsoever to improve the quality or availability of social care for anyone”.
Professor Clements believes that Local Authorities
“will end up with debt portfolios of many millions. There will be a temptation to sell this debt or indeed the Government may be unable to resist the urge to privatise it (as is happening with the student loans scheme). This could have potentially disastrous implications for the public purse and for the individuals whose deferred payment arrangements then become mortgage debts owned by private sector venture capital funds – who may then be able to increase the interest rate, add penalties and other imaginative additional charges. This might once have seemed farfetched, but no longer – look no further than the current leasehold ground rent scandal”.
The ability to defer care payments is currently available for those requiring residential care. However, under the Government’s proposals, those who need care in their own home (domiciliary care) will also be able to defer payment until death. This also means that for the first time, a person’s home will be taken into account when performing a means test for domiciliary care.
Researchers LaingBuisson report that in 2016, 371,000 elderly people received domiciliary care – while 421,100 received residential care. An additional 500,000 people received social care who were not elderly – and this group would also be subject to the same rules.
Under the proposals, only those with £100,000 or more in assets (including their family home) would pay for care – but as 9 out of 10 homes in England are worth more than this mount, the majority of people would have to pay for their own care. The Conservative’s £72,000 cap on care fees – which was to come into effect from 2020 – has now been scrapped, but Theresa May has promised a consultation on an absolute amount which a person pays towards their own care in Autumn. However, given that the £72,000 care cap was deemed unsustainable, we can expect any absolute limit to be far higher.
Can I protect my home from care fees?
Some people have considered either selling their home early and renting, or downsizing – and handing over their assets to their children early. If you survive for seven years after making the gift, it will not fall into the value of your estate for inheritance tax purposes. However, you cannot simply gift away your money with the sole purpose of avoiding care fees. If you needed care in the future, this would be considered a deprivation of assets by the Local Authority – and there is no limit to how far back they can look when considering whether deprivation has occurred.
Past case law has demonstrated that two factors are important when considering whether a gift was deliberate deprivation of assets – first, when you made the gift, was it anticipated that you would need care in the future? If for example you know you will need residential care in the next year or two, a substantial gift of assets could look suspiciously like deprivation.
Second, there must be a genuine motive for the gift (other than avoiding care fees). If, for example, you are helping a child or grandchild to get on the housing ladder, this is a genuine motive and unlikely to be considered deprivation.
If the Local Authority does consider you have deliberately deprived yourself of assets to avoid care fees, they have wide powers to rectify the situation. These include looking to the new owner of the assets to fund your care fees.
Aside from considering whether the gift would be considered a deprivation of assets, there are other practical considerations. It is important to do a thorough analysis of your current and future needs with the help of a professional before making any gift. Many elderly people will gift away assets without doing a full assessment of what they might need in the future.
It is also important when making a gift that there is no reservation of benefit. If you sign over your house to your child and then continue living in it, this is likely to be regarded as deprivation (this is also very risky and additionally there are a range of undesirable tax consequences).
If you are considering helping a child or grandchild get a foot on the housing ladder or you are looking for other ways to reduce your liability for care fees, please speak to us for advice.