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Care fees Assessment

When someone goes into care, the local authority will carry out a financial assessment. As part of their assessment, the local authority will calculate the cost of the care and how much the individual can contribute from their own resources.

When carrying out a means test, the local authority may consider the value of the property as well as any income, savings or pension.

It is worth noting that The Care and Support (Charging and Assessment of Resources) Regulations 2014, Schedule 2, Regulation 4 states that “A local authority may disregard the value of any premises which is occupied in whole or in part by a qualifying relative of the adult as their main or only home where the qualifying relative occupied the premises after the date on which the adult was first provided with accommodation in a care home under the Act.” A qualifying relative is defined as a spouse/civil partner, partner, former partner,  the person’s minor child, or a relative who is over 60 or  incapacitated.

If someone has savings of over £23,250, they will have to fund the care themselves.

If someone has savings of between £14,250 and £23,250, they will need to contribute towards the cost of their care from income such as pensions and a tariff based on their capital, but the local authority will fund the rest.

Once someone’s capital reaches below £14,250, they will no longer pay a ‘tariff’ income based on their capital, but they must continue paying from income included in the means test. The council pay the remaining cost of their care.

Scenario 1

Richard and Amy are married. Richard falls unwell and needs to move into a care home where he is in the best hands. Is the value of the home considered when the local authority carry out the means test? Would Amy be liable for care home fees and could the local authority put a charge against the home?

The good news here is that if Richard goes into care and Amy continues living in the home, then the value of the home isn’t considered by the local authority when carrying out the means test. This is because, as stated above, the local authority may disregard the value of any premises which is occupied in whole or in part by a qualifying relative of the adult as their main or only home where the qualifying relative occupied the premises after the date on which the adult was first provided with accommodation in a care home under the Act.” As she is his spouse, she falls under the definition of qualifying relative.

Amy would not be liable for care fees as only Richard’s individual’s assets would be considered. The local authority could not put a charge against the home for as long as it is being disregarded in the means test.

Scenario 2

If Richard and Amy both go into care during their lifetime would the home be part of the means test and could it be sold to fund their care?

If they both go into care during their lifetime then the home would no longer be disregarded for care fees unless there was still a relative under 18, over 60, or incapacitated living in it.

This means the value of the home would be considered for their individual means tests and it could also be sold to fund their care if they don’t have enough capital to fund themselves.

Scenario 3

Adrianna owns her home solely with no-one else living with her. Can she protect her home from care fees in the event she needs to go into care during her lifetime by gifting it to her children?

We would not be able to advise on any lifetime planning to protect her property. If she gave her property away to her children or to trust in lifetime and the intention was to avoid paying for care, then this would be classed as deliberate deprivation. In this instance, if the local authority decide that some has committed deliberate deprivation for the purposes of the financial assessment, they can still treat the person as if they own that asset.

Scenario 4

Richard passes away and he has a Protective Property Trust in his Will so his share of the home passes to the trust. Amy then needs to go into care. Would the home be assessed for care fees and would the home need to be sold to pay for care or a charge placed on it?

Amy would be assessment on her share of the property only and not the share that is in trust since this is protected. If she needs to self-fund but doesn’t have enough capital to cover this without selling the property, the local authority will seek to place a charge on her share of the property to reclaim their fees when the property is sold. This is usually referred to as a deferred payment scheme.

What can be done by Will to protect the home from care fees?

It is important to note that a Will speaks from death so any provisions in there will take place on death only.

A life interest trust can protect part of the home from care fees since the deceased’s share of the home has transferred to the trust so will not be counted as part of the means test assessment carried out by the local authority.

New proposals to Adult Social Care

This month the government announced proposed changes to adult social care. Currently, before someone can receive publicly funded social care, they are assessed and the value of their assets are taken into account.

Currently if an individual has assets above the £23,250 threshold, they must fully fund their own care, rely on friends or family or even go without care.

The proposals put forward by the Government would make the means test more generous so instead of the individual having to pay for all their care in the event their assets are above £23,250, from October 2023, they would only have to fully fund their care if their assets are more than £100,000.

Currently if someone has assets from £14,250, they must contribute towards the cost of their care. This figure will now be £20,000.

There is also set to be a cap on the amount an individual has to pay for care during their lifetime which is set at £86,000. However, this cap would only cover the cost of a care home that an individual’s local authority was willing to pay for (not all care homes). Alternatively, if someone required home care, it would only cover the number of hours their local authority thought was needed and at the price it would be willing to pay. This cap would not include the living expenses in a care home i.e. food.

With the current climate of social distancing and avoiding mixing with people outside of your household as much as possible it might be tempting to consider writing your own will. After all, you may feel this is safer as you avoid the need to travel out to visit a will writer or have them meet you in your home. DIY wills are not without their dangers though, and this article will set out why they ought to be avoided. We will also look at what you can do to make sure you can still have a professionally drafted will put in place even during these times of social distancing.

What can go wrong with a DIY will?

1. Your estate planning might not be as simple as you think

Do you own property abroad? Do you own a business or a farm? Maybe you have a large estate and you would like to plan for the best inheritance tax (IHT) outcome. If so you might not be in the best position to write your own will as you would benefit from taking specialist advice on all of those matters.

A professional could advise you to make sure you have an efficient estate plan in place. This could mean using more complex planning that you may not have been aware of such as trusts and making sure you’re aware of the IHT allowances available to you and how to make the best use of them. You may save money initially by writing your own will instead of paying a professional, but in the end it could cost your estate much more in taxes that could have been mitigated.

2. You might not be doing enough to protect your estate from claims

If you are planning on excluding someone who might expect to benefit from your estate you may not realise that the law allows certain people to apply to the court after your death for some provision from your estate if your will failed to make ‘reasonable’ provision for them. Professional advice will benefit you here. A will writer will be able to tell you who may have a claim against your estate and what can be put in place to mitigate their chance of success.

3. The will might not be valid

For a will to be legally valid it has to meet certain requirements set out by law, specifically section 9 of the Wills Act 1837. If a will isn’t signed and witnessed correctly then it won’t be valid and it will have no legal effect.

Getting the witnessing right is key, and with the Covid-19 situation at the moment this is causing some difficulties. You need two witnesses to watch you sign your will and to then sign themselves afterwards. At the moment it may be tempting to ask your witnesses to watch you sign remotely, for example via Skype or Zoom, but sadly this isn’t allowed so a will witnessed in this manner won’t be valid. It would be an easy mistake to make in a DIY will if you weren’t familiar with the signing requirements though.

4. The will might be valid but certain gifts might fail

Your DIY will might be validity signed and witnessed but there is still a danger that your wishes won’t take effect or parts of your will might fail. The main issues you could face are:

  • If one of your beneficiaries or their spouse or civil partner acts as a witness to the will then any gift to them will be void.
  • The wording used in the will is ambiguous or uncertain.
  • The will attempts to gift your ‘share’ in a property that you own with someone else, but the property is owned as joint tenants so the gift in the will fails.
  • The residuary estate is not properly dealt with so some of your estate passes on intestacy – this is where assets pass to certain relatives in a hierarchy, so not necessarily to the people you wanted to benefit

Remember, if something in your will is uncertain you won’t be around to provide any clarity to resolve any issues. That’s why it is so important to make sure the wording in the will is clear, certain, and the correct legal terminology is used where appropriate.

5. You didn’t appoint someone to deal with your estate after death, or to care for your minor children

A will should appoint executors to deal with your estate after you pass away. They will be responsible for dealing with your assets, your debts, declaring and paying any relevant taxes, and ultimately making sure your estate passes on to the people you want it to. It is important you appoint someone you trust to take on this role, otherwise someone will be appointed after your death and that person may not be the most suitable executor.

If you have minor children you have probably given some thought to who you would want to care for them if anything happened to you. It is a common misconception that minor children will automatically pass into the care of their godparents or your next closest relatives, but this isn’t the case. To make sure that people you know and trust take on the care of your children you would need to appoint them as a guardian, and this can be done by will. This is something that is often overlooked in DIY wills, simply because the person making it wasn’t aware it was something they needed to do in their will!

How do I have a professional will drafted safely during a pandemic?

So now you’re convinced that a professionally drafted will is the way forward but still concerned about how you can safely arrange for this. Don’t worry, there’s no need to put yourself at any unnecessary risk and you can still safely socially distance while having a will professionally drafted.

Tim Willams and his team offer to take your instructions from you remotely via email, telephone or video-link meetings during the Covid-19 restrictions. So, there is still no need for you to leave the safety and comfort of your own home. For further information, please contact us by telephone on 01327 261262 or email timewills@planningawill.co.uk

The Residence Nil-Rate Band (RNRB)

This is an additional allowance in Inheritance Tax for married couples and civil partners and applies when they are leaving their property to “direct descendants”.

The maximum reliefs available (per person) are: 2017-18 +£100.000; 2018-19 +£125,000; 2019-20 +£150,000 and 2020-21 +£175.000

They will be reduced to the value of the property at the date of death if it is less. For example, in June 2020 Mr A dies and his property is worth £150,000 – then that is the value of the RNRB. However, if the value of his property is £250,000 then the relief would rise to £175,00 (maximum relief).

When valuing the property remember to deduct the value of any mortgage and also take in to consideration that if the deceased had more than one property, the Executors can elect which one is to be used for the purposes of the additional RNRB allowance.

 

EXAMPLE:- Mr C owns two terrace properties in Northampton, one is worth £80,000 and the other is worth £90,000 and both qualify as his residence. The Executors select the property worth £90,000 which maximises the amount of the available RNRB at £90,000.

EXAMPLE:- Mr B owns a farmhouse in Banbury worth £300,000. He realises that the value will limit the RNRB and so upsizes shortly before his death to a property worth £375,000. His Executors now have a full RNRB (£350,000 on his death) which is made up as £175,000 from his pre-deceased spouse and his own RNRB of £175,000

The Taper Restriction – There is a taper restriction applied to the above arrangement. It commences at £2m in 2020-21 and thereafter will increase with the Consumer Prices Index.

Please note that the fine detail of much of this legislation has yet to be announced but, as it becomes clearer, further posts will be made on this website.

When Do I Need to Alter My Will?

We recommend that you review the content and provisions made within your Will on a regular basis – every two years is ideal. As a matter of course, we contact all our clients on a two-yearly basis to offer this facility. The sorts of changes in circumstance which may result in a change in your Will having to be made are as follows:

  • If someone named within the Will has passed away
  • If your address (or that of any other person named within the Will) has changed. This is particularly important if there is a Trust within the Will
  • If you marry or enter in to a civil partnership following the signing of your Will, the Will is revoked, unless you have made the Will in contemplation of the marriage/civil partnership and included the relevant clauses within the Will
  • If any of the persons named within your Will change their name, either by marriage or otherwise
  • If your divorce, have your marriage annulled or declared void. This will result in the Will still being valid but being read as though the name of the divorced partner had been deleted. It does not however stop a claim from that person on your Estate, so a new Will being written to include an exclusion of benefit is vital
  • If you have your first child (or additional children) for whom you will need to appoint Guardians
  • If you no longer possess an item which you have bequeathed within your Will
  • If you have reconsidered the distribution of an asset or an amount of money
  • If you acquire additional assets which increase the value of your Estate and cause a potential Inheritance Tax or Capital Gains Tax liability you may need to seek advice regarding effective tax planning and/or protective measures and Estate Planning
  • If you initially wrote simple Wills but have now become concerned about issues such as sideways dis-inheritance, death and re-marriage causing assets to pass down another bloodline and sundry third party attacks such as Local Authority care charges, tax liabilities and the like.
  • If you acquire foreign assets or make a Will outside England and Wales

The above present just some of the situations which may require a revision of your Will, however it is by no means exhaustive. If you have any doubts whatever, please do not hesitate to contact us for advice.

Pre-Paid Funerals – Do They Give Value for Money?

Afternoon television in particular is laden with adverts for Insurances (usually aimed at the over 50’s) which, for a relatively small monthly premium, will pay the insured’s Estate a lump sum designed to fund his/her funeral costs. Such adverts are usually fronted by well-known personalities whose appearances impart a degree of respectability and trust to that product.

As always, care must be exercised when considering such offers. First, consider whether the monthly premium, when accumulated over a lengthy period of time of say 30 years, which is quite possible if the insured takes the policy out when aged 50 and lives til beyond 80, will actually exceed the guaranteed sum payable. Then consider that there is NO cash-in value to the plan, so if for example the insured were to fall on hard times financially, no longer being able to afford the premiums, there is no cash-in facility to recoup those monies which have been paid in. Finally, with the cost of funerals (like everything else) rising at a staggering rate, will the sum assured actually cover the whole cost or simply a portion of it?

Pre-Paid Funeral plans however are different from this. They do “exactly what they say on the tin”. You purchase a funeral “package” now, at today’s price and that funeral “package” is delivered for you, when you pass away – no matter how many years after you bought it.

There are several reputable Companies in the market place and again, due diligence is required, however we have considered many such plans and can recommend Safe Hands whose prices are amongst the most competitive in the market place currently (2016).

An average funeral costs £3,500 today. In ten years time, it is predicted that this figure will be close on £8,000. So, by buying today you have “saved” about £3,500 – £4,000. But, not only this, and perhaps more importantly, you have been able to tailor your own funeral “package” to include all the elements which are really important to you and exclude all the elements which you really loathe. You choose your preferred funeral director, the number of limousines, the type of hearse, the place of burial or cremation, the mode of dispersal of ashes and so on and so on. Most importantly, you take the onus of all the decision-making away from the ones you’ve left behind at a time which they are grieving and finding it difficult to cope.

Finally, by choosing a reliable and trustworthy Company such as Safe Hands, you can be sure hat the money you have paid for the funeral will be held in a safe high interest bond so that when the time does eventually come to fulfil the policy, there are no hidden extras for your surviving loved ones to have to fund and thereby worry about.

Please ask for further details and make an appointment to discuss this in greater detail.