Channel 4 recently broadcast a Dispatches episode titled "How to Avoid the Dementia Tax." The episode looked at how individuals are increasingly having to use their own assets to fund their care fees, despite the availability of Local Authority and NHS Continuing Healthcare funding. The so called 'Dementia Tax' has received an increase in media attention since Theresa May's recent U-turn on proposals to reform the current adult social care arrangements, but what exactly is 'Dementia Tax' and can it be avoided?
What is Dementia Tax?
As it stands, if you require care in later life, your assets will be means-tested by your Local Authority in order to access whether they should be making a contribution towards your costs of social care. If you have assets and savings over £23,250, in most cases, you will have to fund the full costs of your care. As a result, people with longstanding conditions end up paying hundreds of thousands of pounds, exhausting their savings until there is little left. In most cases, the Local Authority will only take over the payment of your care costs in full when your assets and savings fall below the lower limit of £14,250. This long-term financial drain is the 'Dementia Tax' to which people are referring too.
The assets that will be taken into consideration when making the means-tested assessment will be dependent on your circumstances. If you are receiving care at home, or if you move into a care home and a spouse or relative over age of 60 remains living at the property, the value of your home will not be taken into account when making the assessment. However, if the property is left unoccupied by anyone over the age of 60, then the full value of the property will be taken into consideration when making the calculation.
Is funding always means-tested?
In some cases, you may be entitled to full care funding if you have a 'primary health need' and meet the NHS Continuing Healthcare eligibility criteria. There is no clear definition as what qualifies as a primary health need and a checklist should first be completed to see whether the individual needs a full assessment for NHS Continuing Healthcare. If it appears that a full assessment should be performed then a multidisciplinary team from the local Clinical Commissioning Group will perform this. Effectively, if someone qualifies for NHS Continuing Healthcare, the NHS must pay for their care, regardless of the individuals own financial circumstances as this care is not means tested. This care can be provided in a nursing or care home setting or in the individuals own home.
The Dispatches episode highlighted the issue that many Local Authorities have a very varied approach to implementing the assessment criteria. It is often interpreted very strictly and what might be considered a 'primary health need' in one Local Authority, might not be considered that in another. If you know someone who has been refused an application for NHS Continuing Healthcare, it is important that they are aware of their ability to challenge the decision if they feel their claim has not been dealt with in the correct manner. It is possible to contact the Clinical Commissioning Group for an independent review within 6 months of the initial decision. Clapham and Collinge have a team experienced in dealing with NHS Continuing Healthcare claims.
It is also possible to request a care needs assessment with your Local Authority. Local Authority care needs assessments are available to everyone, irrespective of their financial position or the complexity of their care needs. Should you request a care needs assessment, the Local Authority will assess your current care needs and check whether you meet the set criteria. If you qualify for care, the Local Authority will also carry out a means-tested assessment to calculate the contribution you are required to pay for your care.
Can I take any action to avoid paying Care Fees in the future?
This might leave you wondering whether any action can be taken to avoid paying care fees in the future. Many myths exist about the steps people can take to protect their assets from being used to fund the future costs of care. The Dispatches episode highlighted the most common of these misconceptions; whereby a parent tries to protect their assets by simply signing their house over to their children, in the belief that this will avoid it being taken into consideration for means testing.
Unfortunately, it is not this straightforward. If a transfer is made at an undervalue within 6 months of the need for care arising, the Local Authority will ignore the transaction when making an assessment for care contributions. In other words, you will still be treated as owning the property.
More importantly, if a transfer is made at an undervalue at anytime, with the main intention being to avoid the future liability of care fees, the transfer will be considered a 'deliberate deprivation' and will again be ignored by the Local Authority when making an assessment for care contributions.
Many people mistakenly believe that Local Authorities only look back at transactions within the past seven years when making an assessment on care fee eligibility. Unfortunately, this is not the case. The seven-year rule only applies to Inheritance Tax and not local authority care. Local Authorities are entitled to look back for an indefinite period in order to establish if any transaction has been made with the intention of deliberately depriving yourself of the asset. This means that, unless you are able to show a substantial reason for making a transfer, other than a reason than the mitigation of care costs, the transfer will not be effective in removing the asset from financial assessment.
If you are thinking of making plans to plan for care fees in later life, it is important that you take professional legal advice. To find out more or discuss your individual requirements in further detail, our dedicated Wills, Trusts and Probate Solicitors will be delighted to help. Contact us today on 01603 693500 or email us using the 'Make an enquiry' form. Appointments available at our Norwich, North Walsham and Sheringham offices.