Care Home funding guide
When deciding to move your loved ones into a care home, fully understanding the cost involved can be naturally one of the biggest concerns. The following guide on fees and funding will help you decide on what to do. We recommend that you seek specialist advice to answer any further questions.
Remember, the way care is paid for across the UK will vary.
Who qualifies for local authority funding?
Local authority will carry out financial assessment which is also known as a “means test” of your relative’s income to decide how much financial assistance they are entitled to.
If your loved one is assessed as needing care, and your capital (which includes income, savings and assets) is below £23,250, financial support is available from the local authority. If your relatives capital is below £14,250 they will be entitled to maximum support, although they will have to contribute all of their income (including benefits, which they must claim) to the local authority, except for the personal expenses allowance.
If their capital is between £14,250 and £23,250 they will have to pay £1 for every £250 of their savings between £14,250 and £23,250. This is known as ‘tariff income’ and they will also need to contribute all of their income towards the fees, except for the personal expenses allowance.
What if the home costs more than the local authority is prepared to pay for?
The local authority will allow the fees to be topped up by a third party so long as they are able to do so over the long term. You are not allowed to top up the fees yourself from your capital below £23,250.
If your relative owns their own home?
- If your loved one’s capital is below £23,250 excluding their own home, under certain exceptions they may still be entitled to financial assistance from local authority.
- If they own a property jointly with their partner, the property will be disregarded (see ‘Property Disregard Agreement’ below).
- If they have a partner still living in the property, then it won’t be included, as the partner still has a right to live there.
- The property will also be excluded from assessment if they have a close relative living in the home who is either incapacitated (they receive or would qualify for a disability benefit); a child they are responsible for under the age of 18; or aged 60 or over.
The local authority has discretion to ignore the property in special circumstances, such as if it is the only home of your relative’s long-time carer.
In other words, a self-funder won’t necessarily be in a position where they have to sell their home.
If they do no longer need their home to live in, there is an assumption that this will be sold as soon as possible to fund care. There are some exceptions (see 12-week property disregard below)
Deferred payment agreement or deferred payment scheme
If your relative doesn’t have enough money to pay their fees and is finding it difficult to sell their home, or doesn’t want to sell it straightaway, they can request a long-term loan known as a ‘deferred payment scheme’ or ‘deferred payment agreement’ (Northern Ireland excepted). This means that the council will pay your relative’s residential care costs and secure the loan against your relative’s property, until he or she passes away or the property is sold. At this point the loan will be repaid to the council.
From 1 April 2015, changes in the Care Act will mean that all councils in England will be required to offer deferred payments to people who meet the following criteria:
- they have needs that require residential care
- they are financially assessed to have less than £23,250 in savings, other than the value of their property
- the value of the home would otherwise be included in the means test (i.e. there is no one, such as a partner or child, living there, in which case it would be disregarded.
Paying interest on the deferred payment agreement
Before 1 April 2015 it was the case that while your relative is still alive, no interest would be added to the loan, but after your relative dies, interest would be added after 56 days. However, it is now the case that local authorities are able to charge interest on the deferred payment (according to a nationally-set rate) together with a charge for administering the payment from the start of the agreement.
Both the interest rates and charges are designed to cover the local authority’s costs in making the loan; they are not allowed to make a profit from the arrangement.
When the property is sold, the executor of the estate will be liable to repay the debt out of the estate, though they are not themselves personally liable.
12-week property disregard
If your relative permanently moves into a local authority funded care home in England, Wales or Northern Ireland, has less than £23,250 in savings (£24,000 in Wales), low income and owns their own property, the council must ignore the value of the property for the first 12 weeks of their stay (2015-16).
If they have more than £23,250 in savings (in Wales: £24,000), when their savings run down to less than £23,250, the council must ignore the value of the property for 12 weeks.
Whatever the situation, if your relative sells their property before 12 weeks, the disregard ends. After 12 weeks, the value of their property will be counted as part of their capital.
If your relative owns a property with a partner, who still lives there, the property is disregarded until circumstances change. If the partner wants to move to a different property or also decides to move to a care home, your relative can use their share of the sale proceeds to help their partner buy another property or costs of care. If the partner dies, and the house is sold, your relative’s share of the property would then be taken into account as part of their assets. It is worth checking the local council’s procedures regarding this.
There are additional forms of support available to those who need it. For example, if you have been assessed as having needs that should be met with Nursing care then your Nursing costs will be paid for by the NHS. This is known as NHS Funded Nursing care.
The Nursing care contribution is paid directly to the care home. If you receive funding from your local Council, the Nursing care contribution will be deducted from the amount the Council contributes and will not reduce your assessed financial contribution or any third party top up.
If you are paying for your own care, the Nursing care contribution is deducted from the full cost of the care home fee.