Care Home Funding Guide: What You Need to Know
It’s important to understand all the costs involved when deciding to settle your loved ones into a care home. We’d like to help you do this with as little stress as possible; it’s recommended that you seek specialist advice for specific information, but we’ve outlined the basics for you in this section.
Please note that care home fees and transaction methods will vary across the United Kingdom.
Who Qualifies for Local Authority Funding?
Your local authority will carry out a financial assessment which is also referred to as a “Means Test”, to work out your family member’s income and decide how much financial assistance they’re entitled to.
- If it is determined that your family member requires professional care and their capital (including income, savings, and assets) is below £23,250 then financial support will be available from the local authority.
- If it is determined that your family member requires professional care and their capital (including income, savings, and assets) is below £14,250 they will be entitled to maximum support from the local authority. However, they will need to contribute all their income (including benefits which they must claim) to the local authority; excluding personal expenses allowance.
- If it is determined that your family member requires professional care and their capital (including income, savings, and assets) is between £14,250 and £23,250 then they will need to pay £1 for every £250 of their savings. This is known as “tariff income”. Your loved ones will also need to contribute all their income (including benefits which they must claim) to the local authority; excluding personal expenses allowance.
What if the Home Costs More Than What Local Authority is Prepared to Pay?
The local authority will allow the fees to be topped up by a third party, providing that this is guaranteed over a long-term period. It is not permissible to top up the fees yourself, from a capital that is below £23,250.
What Happens if Your Family Member Owns Their Own Home?
- If your family member’s capital is below £23,250 (excluding the value of their own home), under certain exceptions they may still be entitled to financial assistance from the local authority.
- If your family member has joint ownership of their property with their partner, the property will be disregarded (please see ‘Property Disregard Agreement’ below).
- If your family member’s partner is still living in the property, then this will not be included, as the partner still has the right to live there.
- The property will be excluded from assessment if your family member has a close relative living in it who is either incapacitated (they receive or would qualify for a disability benefit); or a child who they are responsible for- under the age of 18 or aged 60 or over.
The local authority has discretion to ignore ownership of a property under special circumstances; such as if it is the only home of your family member’s long-term carer. This means that a self-funder will not necessarily find themselves in a position, where they’ll be required to sell their home.
If your family member no longer needs their home to live in, the assumption will be held that it will be sold as soon as possible to fund their professional care. Please note that there may be some exceptions (see 12-Week Property Disregard below).
Deferred Payment Agreement or Deferred Payment Scheme
If your family member cannot afford to pay their fees and is struggling to sell their home or is not prepared to straight away- they can request a long-term loan, known as the “Deferred Payment Scheme”, or “Deferred Payment Agreement” (Northern Ireland excepted).
This means that the council will then pay for your family member’s residential care costs and secure a loan against their property; until they pass away or until the property is sold- at which 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 if your family member was still living, the law was that no interest would be added onto the loan; after their passing however, interest would be added after 56 days.
Now, the local authorities can 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 when paying out the loan. It is not prohibited for them to make a profit from the arrangement.
When your family member’s 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
The 12-week Property Disregard
If your family member permanently moves into a local authority funded care home in England, Wales or Northern Ireland, and has less than £23,250 in savings (£24,000 in Wales), earns a 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 your family member has more than £23,250 in savings (in Wales: £24,000), when their savings drop below £23,250, the council must ignore the value of the property for 12 weeks.
Under all circumstances, if your family member sells their property before 12 weeks, the disregard ends. After 12 weeks, the value of their property will be included as part of their capital.
If your family member has joint property ownership with their partner- who still lives there, the property is disregarded until circumstances change. If their partner wants to move to a different property or also decides to move to a care home, your loved one can use their share of the sale proceeds to help their partner buy another property or cover the costs of care. If their partner passes away and the house is sold, your family member’s share of the property would then be considered as part of their assets. We recommend that you check the local council’s procedures regarding this matter.
There is always additional support available for those who need it. For example, if your family member has been assessed as having care requirements that should be addressed by professional nursing, then the nursing costs will be covered by the NHS. This is referred to as “NHS Funded Nursing Care”.
The nursing care contribution is paid directly to your family member’s care home. If they receive funding from the local council, the nursing care contribution will be deducted from the total amount the council contributes and will not reduce their assessed financial contribution or any third party top up.
If your loved ones are paying for their own care, the nursing care contribution is deducted from the full cost of the care home fee.