The Means-tested Regime
The means-tested regime is run by the Social Services Department of the Local Authority. The Regulations under which they work are set by central government. The following is a general overview for England, which may not be appropriate in your particular circumstances, so this is not a substitute for individual professional advice. Ring us now for an appointment to ascertain your particular position.
Social Services carry out an assessment of the resident’s assessable capital and income. As long as you have assessable capital above £23,250, you pay for yourself. Once assessable capital falls below £23,250, they take the resident’s income (except for allowances, of which the most important is the Personal Expenses Allowance – a small amount for soap, sweets and treats) and add a tariff amount (for every £250 of capital between the upper and lower limit) that Government says it is reasonable for the resident also to pay towards the Nursing Home Fees. The level of the tariff amount is set such that no IFA could advise a product to generate the return to pay it, because even if such a product ever existed, it would be far too risky for someone with only £23,250. Inevitably, the resident’s capital therefore diminishes to £14,250 at which point only the resident’s assessable income (after permitted allowances) is taken towards the fees and the Council pays the rest.
So the key question is: what is assessable capital?
You need someone who really knows their way round the “notional capital” and the “disregards” in the Regulations. An example is that the house is disregarded if it is occupied by a spouse or certain others. There is discretion to disregard if the house is occupied by people who do not come within the definition. Knowledge of rulings, custom and practice are vital to argue successfully for the exercise of discretion.
If discretion is not exercised, valuation is an art not a science! An expert’s arguments can be worth their weight in gold – especially if they succeed in getting a nil valuation.
There are financial products available to Wexdon that are tailored to take advantage of the definitions in the Regulations, so they are disregarded in the computation of assessable capital. If they make investment sense, the fund in the disregarded investment can be kept in tact, so it goes to the family members whom the resident wishes on his or her death, rather than being spent on Nursing Home Fees.
There are anti-avoidance provisions that mean a person cannot just give their assets away the week before they go into a home. All steps should be completed at least 6 months before the person goes into the home, and preferably more than 2 years before.
A person who deliberately deprives themselves of capital to reduce what they have to pay can find the amount added back in as notional capital, and this can apply to transactions outside the 6 months referred to above. Recovery can involve making the resident bankrupt (to his or her great distress) and the costs of the proceedings (which are always substantial) being ordered to be paid by the resident and the family members who were given the resident’s property. So you definitely want to avoid the anti-avoidance provisions!
Please remember the Rules in Scotland, Northern Ireland and Wales are different, so this website deals only with the situation in England.