Protecting your assets from the costs of care

As we age, the prospect of needing long-term care becomes increasingly significant and it might be something you’re discussing as a family.

However, for many, the concern isn’t just the quality of care but the financial implications that accompany it.

Care home fees in the UK can vary significantly, but on average, they range from £600 to £800 per week for residential care and £800 to £1,200 per week for nursing care.

These costs can quickly deplete your savings if not planned for adequately and the key to mitigating this financial burden lies in early and effective planning.

How trusts ensure your wishes are met

By clearly delineating your wishes in a trust, you can prevent family disputes and ensure that your assets are protected according to your intentions.

There are two main types that we recommend:

• Discretionary trusts: Including a Discretionary Trust in your Will can be a powerful tool. This type of trust allows trustees to manage the assets on behalf of beneficiaries, providing flexibility and control. It can also protect assets from being assessed for care home fees, as the trust can dictate that funds are not directly accessible by you, the donor.
• Life interest trusts: Another option is a Life Interest Trust, which can be included in your Will. This allows a beneficiary, often a spouse, to live in a property for their lifetime, with the property then passing to other beneficiaries after their death. This can ensure that your spouse has a place to live while preserving the property for future generations.

In either case, you’ll need a solicitor to assist you in setting up a trust and managing it once it’s in place.

Once they are enacted, trusts allow you to continue living as you were without the worry that your assets will be used to pay for care.

Using Lasting Powers of Attorney to safeguard your decisions

A Lasting Power of Attorney (LPA) is a legal document that allows you to appoint one or more individuals to make decisions on your behalf should you lose capacity.

There are two types of LPAs:

• Property and financial affairs LPA: This enables your attorney to manage your finances, including paying bills, managing bank accounts, and selling property. Having this in place ensures that your financial affairs can be managed effectively and according to your wishes if you are unable to do so yourself.
• Health and welfare LPA: This allows your attorney to make decisions about your personal health and welfare, including medical treatment and care home arrangements. This ensures that your care preferences are respected and that someone you trust makes decisions for you.

In either case, should you need someone to make decisions on your behalf, an LPA gives a trusted family member or friend that right and responsibility.

This mean, should you need care and be unable to find a suitable solution yourself, someone else can help.

Deprivation of assets: what you need to know

One of the critical aspects of care home planning is understanding the concept of deprivation of assets.

This is where you deliberately reduce your assets to avoid care home fees, instead relying on the local authority’s funding to pay for it.

Whenever you look for care, your local authority will conduct a financial assessment to determine your ability to pay for the service.

However, if they believe you have intentionally deprived yourself of assets, they may include those assets in their calculations.

Therefore, to avoid accusations of deprivation of assets, it is crucial to plan early and document your intentions clearly.

Legitimate methods to protect your assets include:

• Gifting assets: While gifting assets to family members is a common strategy, it must be done well in advance of needing care. The local authority can investigate transfers of assets made up to six months before entering care, and sometimes even further back if deprivation is suspected.
• Trusts: Establishing a trust, such as a Family Protection Trust, can be an effective way to manage and protect assets. These trusts can help safeguard your assets from care fees, provided they are set up correctly and not purely for the purpose of avoiding care costs.

Both of these are permissible methods for reducing your wealth to help you pay for care on a long-term basis.

However, this is a tricky subject and can result in situations where you may be seen to be defrauding your local authority.

As a result, we always recommend you discuss this issue with your solicitor.

We can ensure that what you do is legally sound and does not put your assets at further risk from care home fees or repercussions.

If you’d like assistance with planning for future care, please speak to one of our private client solicitors.