Normally, an elderly person who lives in a care home is required to pay all or part of the cost of their care based on criteria laid down in the Charging for Residential Accommodation Guide (CRAG).
A local authority is not required to charge for care where the period of accommodation lasts for fewer than eight weeks. After eight weeks, the local authority must charge at the standard rate and carry out an assessment of means to ascertain the appropriate level of charge to be made to the resident. A resident who refuses to be assessed will pay the full standard rate without contribution from the local authority.
The means assessment is based on the capital and income of the resident. The home of a resident is disregarded when they intend to return to it and it is still available for them to occupy, or they are taking reasonable steps to dispose of it in order to acquire another home to which they intend to return after temporary residence in the care home. A property owned jointly with others will be considered to be an asset proportionate to the number of joint owners, so where there are three owners, a one third share of the total value would apply. There are special rules governing the valuation for assessment purposes of properties held in different legal forms or where the property is difficult to realise.
In general terms, financial assets are regarded as part of the resident’s capital but personal property is not, provided the purpose of the acquisition of the personal property was not to avoid the amount of assessable capital. There are special rules for some types of investment, such as insurance bonds.
Generally, the income assessment includes all income, although there can be exceptions where appropriate, such as, for example, for business income where the business is being sold.
At present, a resident in a council care home must use their own capital to pay for their care until the capital is reduced to £23,000. After that, a contribution is made on a reducing scale until the resident’s capital is reduced to £14,000. This is done by the local council assessing each additional £250 of capital as producing an income of £1 per week. When the capital is reduced to £14,000, no further contribution is necessary.
The value of a house is not taken into account as capital for the first 12 weeks of residential care and is not taken into account at all if your spouse or civil partner continues to live there. However, if a permanent transfer to a care home is likely, as is often the case, then the home becomes an assessable asset. It may be thought, therefore, that it is a good idea to transfer the home to (say) a family member so it falls out of assessment. However, when an attempt has been made to manipulate the income or capital of the resident to prevent it falling into assessment, for example by transferring an assessable asset, CRAG allows the local authority to make an assessment to recover the charge from the person to whom an asset has been transferred in the six months prior to admission to the care home. In principle, if the purpose of the transfer is to avoid care home costs, the council can challenge a transfer made at any time, so even if if the transfer happened more than six months before you moved into care, it can assess you as if you still own the assets.
It is naïve to think that simply transferring assets shortly before going into a care home will be effective as a way of avoiding liability for the fees. Any arrangements to transfer assets should be part of a family wealth preservation plan based on advice from your solicitor.