At a recent meeting of the Society of Will Writers, Philip Laidlow of Laytons Solicitors, experts on Home Protection Plans had this to say on the upcoming changes to the law in relation to the costs of Social Care:
2016 – Financial Changes
From April 2016 a new regime will apply generally. The following is restricted to noting the principal changes to the financial regime.
Planned cap on social care costs
It has been widely reported that there will be a cap of £72,000 on what pensioners will have to pay for their care and once the cap has been reached there will be no further contribution to pay. People have widely assumed that this is the maximum a person will have to pay for care. That is not the case. The cap does not cover accommodation and living costs. It is envisaged that the Government will set this so called “daily living cost” at around £12,000 per annum ie subject to means testing, care residents will have to pay £12,000 per annum irrespective of whether or not the cap of £72,000 has been reached. Put another way, the maximum pensioners will have to pay for their care will be £72,000 plus £12,000 per annum (adjusted annually) subject to means testing. The daily living cost amount is expected to be adjusted annually.
Personal care costs will be excluded from the cap eg hairdressing costs, help with dressing etc.
NB top-ups ie payments towards care over and above what the local authority will locally sanction will not count towards the care cap.
Anecdotal evidence suggests that the care cap of £72,000 will benefit a relatively small number of people, variously suggested between 8% and 15%.
Most people who enter care usually do so for 2 years or so. The care cap may well not be relevant. The cap is there more for protection against catastrophic care costs ie for those who are in care for many years.
NB the care cap will not come into effect until 1 April 2016. Nothing spent on care prior to that date will count. In other words, from 1 April 2016 nobody will have any accrued care costs. There will be no backdating of prior claims.
There will be a significant increase in the upper capital limit. Below the upper capital limit individuals may contribute from income (including income taken to be derived from capital – see below) but not assets; those with assets above the new capital limit will be deemed to be fully self-funding until assets drop below this point.
There will be two upper capital limits – £27,000 and £118,000.
The £27,000 limit will apply to those in circumstances where the value of their home is to be excluded eg people living and receiving care at home, and also people who move permanently into care but the value of whose former home is ignored because it is disregarded for one reason or another eg because a spouse/partner, relative over 60, or incapacitated dependant lives there.
The £118,000 upper capital limit will apply to those whose circumstances mean the value of their home is being included in the means test ie people moving permanently into care where there are no disregards on the value of the former home.
There will be a proposed lower limit of £17,000 which is only a modest increase on the current lower limit. NB there will be a deemed income of £1 per £250 capital or part thereof between the lower and upper capital limits.
12 week property disregard rule
The current rule that irrespective of the circumstances the property is disregarded for the first 12 weeks will continue to apply. This will mean that for 12 weeks the upper capital limit will be £27,000. Subsequently it will be £118,000, if relevant.
While the upper capital limit will be significantly reduced, given current property values the benefit of the increase will in most cases be more illusory than real.
Currently the reality is that either through its ability to impose a unilateral charge on property, or sometimes through arrangement, deferred payment is a reality. From 2016 the system of deferred payments will become more formalised and effectively more of a duty. Local authorities will have a duty to offer the possibility of deferred payment to assist individuals to meet their care costs during life and to avoid selling their properties. While the new system looks to be an improvement, it is less favourable in one particular regard. Currently the local authority is unable to charge interest on an accruing debt until a few weeks after death has occurred. Under the new system, in most cases, interest will be payable throughout.
The new deliberate deprivation test is as below:
Transfer of assets to avoid charges
1. This section applies in a case where an adult’s needs have been or are being met by a local authority under sections 17 to 19 and where:
a) the adult has transferred an asset to another person (a “transferee”)
b) the transfer was undertaken with the intention of avoiding charges for having the adult’s needs met, and
c) either the consideration for the transfer was less than the value of the asset or there was no consideration for the transfer
2. The transferee is liable to pay to the local authority an amount equal to the difference between:
a) the amount the authority would have charged the adult were it for the transfer of the asset, and
b) the amount it did in fact charge the adult
3. But the transferee is not liable to pay to the authority an amount which exceeds the benefit accruing to the transferee from the transfer
4. Where an asset has been transferred to more than one transferee, the liability of each transferee is in proportion to the benefit accruing to that transferee from the transfer.
It will be seen that the phrase is “with the purpose of (in order to) avoiding charges”.
Currently the deliberate deprivation phrase is “with the purpose of decreasing”. I have seen it said by other commentators that, such as the Home Protection Plan is no longer viable because of the new deliberate deprivation rule. I disagree. It looks much the same to me. Read literally the old deliberate deprivation rule could on a literal reading have nullified most Home Protection Plans or similar products. However, courts, and the Department of Health through CRAG, were very clear that there was a distinction to be drawn. If care was foreseeable, in contemplation or on the horizon then such as entry into a trust like the Home Protection Plan trust was deliberate deprivation. However, if the trust was entered into when care was not in contemplation but, for example, was merely for a general motive perhaps as a reaction to horror stories in the press of such as 40,000 homes per year being sold to pay for care, then that is not deliberate deprivation. See the final sections of chapter 6 of CRAG. (6.070 of the latest edition)
It will remain the case under the new law that if there are alternative reasons for using a Home Protection Plan or similar, eg to compensate a child who has made financial sacrifices to provide care (possibly even by moving in) then that continues not to be deliberate deprivation.
Pursuing the transferee
Under the present legislation if the local authority’s resident enters care within 6 months of the act of deprivation (ie the gift into trust etc) then the local authority can pursue the transferee or transferees up to the amount of the value received respectively by them. The 6 month limit is an absolute deadline. Under the new regime the local authority will be able to pursue transferees without limit of time. At first glance this is a significant change and potentially one of large value to the local authority. However, the local authority has first to show deliberate deprivation. Therefore if the Home Protection Plan is entered into at a time when care was not foreseeable this extended remedy does not help the local authority.
Please note that the new deprivation test and the extended remedy against transferees will apply generally after 1 April 2016 ie Home Protection Plans entered into prior to April 2016 will, after 1 April 2016, be judged according to the new deliberate deprivation test, and if relevant the extended remedy against transferees will apply.
So far as the Home Protection Plan continuing to be a suitable tool, I consider that in most cases it will be. The only change is that the Home Protection Plan may no longer be needed when the principal asset is a property of lower value. Generally it will be business as usual with the Home Protection Plan.