In September advisers selling care annuities were warned of the potential for litigation if they did not consider alternative forms of funding which was available to clients needing long term care, such as the fully-funded NHS continuing healthcare option
Saying that, there are various other forms of help available to clients needing care.
If an adviser is asked about care annuities it is likely that there is already some sort of care need.
Although an adviser would not be expected to know the detailed rules about each form of funding, they should be aware of what is available so that they can advise clients of what extra income would be needed.
Some help is means tested, while other help simply depends on care needs.
There are four main ways that an elderly or disabled person can get funding from the state, all of which is tax free.
- Local authority funding;
- State benefits;
- NHS continuing healthcare;
- The Nursing Care Contribution.
Local authority funding
Perhaps the most widely-known is help which is available from the local authority and is means tested.
The local authority will assess an individual based on both their care needs and their finances. They can provide help ranging from full-time residential care down to simply sending someone in to help with the housework or cook a meal.
Someone with capital over £23,250 will not qualify for any local authority funding, while someone with capital of less than £14,250 will get all of their care paid for by the local authority.
Between these amounts partial funding will be available. In Scotland and Wales the amounts are slightly different.
If residential care is chosen, the value of their house will be taken into consideration in the financial assessment. However, if they stay in their own home the house value is disregarded.
The client’s income will be taken into account in the local authority financial assessment, and will include benefits they receive as well as annuity income.
So advisers must consider whether any annuity income or equity release will affect any local authority funding which would be available.
Clients may be tempted to gift their home or other capital to qualify for funding. However, if someone does this, and the sole purpose is to qualify for means tested funding, the gift is disregarded.
There are urban myths which suggest that any gift made six months before care is needed will “be OK”. This is incorrect. The local authority simply needs to prove that the intention of the gift was to qualify for means testing.
This is often known as deprivation of assets.
They will therefore be assessed as still owning the capital. Advisers should be wary of advising clients in this way.
If the local authority pays for care, the client will have a personal budget based on their care needs and either
- The authority will pay the home or the carers
- The amount is paid to the client who pays for the care themselves
If a client chooses to stay in a care home which is more expensive than the local authority will fund, they cannot top up the fees from their own funds.