Financial Care Assessment Process and Potential Pitfalls
If you, or a loved one, are approaching or have care needs then it’s likely you will need to contact the Local Authority at some point to arrange both a Care Needs Assessment and then possibly a Financial Assessment. If you are unsure of this process, then definitely get in touch for help and guidance.
Here we provide a commentary about a recent chat with a representative from the Local Authority where a number of interesting topics came up, especially with regard to Financial Assessments.
Many Local Authorities will address Care and Financial Assessments differently throughout the country. Some will focus on paper or telephone assessments; some still do face to face assessments. Many Local Authorities are going down the online assessment route, perhaps with a view to using AI during the process. The issue with these sorts of assessments is, as always, the devil is in the detail. Online assessments can work and are seen as more efficient; however, these systems are generally very ‘black and white’ and don’t address nuances. The legislation and guidance itself can sometimes be contradictory and unclear, which is not helpful! As well as inconsistencies of approach across the UK – the good old post code lottery!
What does this mean for you as potential ‘clients’ of the Local Authority? Well, where there is nuance and inconsistency and systems that don’t account of nuance and inconsistency, it means that Financial and Care Assessments can be inconsistent.
You can always challenge a decision. Although, like any organisation, mistakes happen, it is often the problem that the Assessment process has not uncovered the correct, or all the information needed to decide. Therefore, do not be shy in challenging a decision. If you are having difficulties, get in touch and maybe we can help or at least sign-post you to a care expert that can.
Each Local Authority should have a review / appeal process. If you are still not happy even after having gone through this then there is always the Local Government Ombudsman. Get in touch for guidance on how best to approach this, if you are in this situation.
Existing Financial Arrangements
Joint bank accounts:
If you hold a joint account with a loved one who is in need of care, then the Local Authority’s normal process is to treat your money as being owned 50:50. However, if your money has obviously come from a different source (the one we see most commonly is if you have received an inheritance that is clearly inherited by you as an individual, rather than a ‘joint’ asset), then best practice would be to move that money into a separate account so that it is clearly ring-fenced. Ensure there is a strong and evidenced audit trail for this transaction.
In a similar vein, if you are an attorney dealing with someone’s finances under a Finance & Property Lasting Power of Attorney, always keep the person’s money and finances separately from your own as attorney. As this could create real difficulties in evidencing whose money is whose.
Property Issues; Downsizing:
A common situation is where a partner or spouse (say the husband) has moved into a care home and the partner or spouse (say the wife) still living in the home would like to downsize to free up capital or maybe not ‘downsize’ but simply move into a different property of the same value.
This situation is catered for in the guidance. The wife can still use the full proceeds of the sale of the house, in order to buy a different, more appropriate house. However, the Local Authority would still want to see a legal beneficial interest in the new house for the husband. Or, if there are proceeds available due to a downsize, then the husband’s share of these proceeds should then be ring-fenced as assets in his name, available for paying for care.
Property Issues; Second Properties:
Deferred Payment Agreements (DPA) are not usually available on second homes or holiday homes. For the simple reason that a share or full ownership of this type of property would form part of a person’s capital assets for care assessment purposes and would take them over the £23,250 limit (DPAs usually only available when someone’s assets go below the £23,250). However, it must be said that the guidance in the legislation is unclear on this subject!
Property Issues; Rental income:
It must be remembered that the Local Authority can’t take both capital AND income into account. Therefore, for example, if you are being assessed on rental income on a second home or rental property, then the Local Authority cannot take the capital value of that property into account during the Financial Assessment.
Lasting Power of Attorney (LPAs) and Money:
A common situation we see is perhaps you are lending your mother or father money in your position as an attorney - to pay for their care fees. If that parent then exhausts all of their funds, how do you then subsequently get the money back from that loan?
Here, if your loved one is a self-funder and is approaching a complete exhaustion of funds, then it is best to approach the Local Authority as early as possible for possible funding options. Do NOT start lending or paying for care if your loved one is in this situation, the Local Authority will not back-date assessments, it’s unlikely you will get the money back in this instance.
Therefore, if your loved one is running out of funds, the advice is to use the established mechanisms for funding, whether that be a DPA or by simply applying for Local Authority funding.
Regarding Lasting Powers of Attorney (LPA) in general, ideally take advice, both through the application stage and also when the time comes to register and use the LPA. The Local Authority (and other relevant institutions for that matter), find that the family think they have things covered but they only have the Finance & Property LPA (and not the Health & Welfare LPA) – there are 2 documents required.
Be wary of not taking advice. Many family members suddenly become attorneys under an LPA but have little idea how to use them or what they are responsible for, which kind of defeats the purpose of taking out the LPAs in the first place.
Other potential issues are during the application phase using inappropriate or ‘lay’ people as the Certificate Provider – the person who is legally ensuring that the donor is aware and understands what they are doing in making their LPAs. Using an inappropriate Certificate Provider can invalidate an LPA just when it’s needed.
Certificate Provider sometimes not the appropriate person, person who signs to say the person is aware and understands what they are doing. There is a clear list.
Time and again, we see LPAs which have been set up on a DIY basis but are not even registered with the Office of Public Guardian (OPG). This results in delays in the attorney being able to make decisions or carry out day-to-day tasks on behalf of the loved one- just when it’s needed. Do not under-estimate the backlog at the OPG in getting LPAs registered, our advice is to get them registered upfront, so they are available when needed.
Finally, another issue to look out for with regard to LPAs, and in particular if you are thinking of the online DIY route instead of taking advice. Institutions, banks, care homes, Local Authority, they will generally check for legitimate LPAs online using OPG100 – the issue here is that this check will only highlight whether an LPA exists or not and whether its registered – it will not detail out the preferences and wishes of the donor, let alone any relevant Letter of Wishes.
If there is no LPA at all, then this is even worse. The Local Authority will have to go via the Court of Protection to get a court-appointed Deputy – a process than take over a year – just when life is going on, care fees need paying and there are financial decisions to be made. Our advice is to get those LPAs done well in advance.
Notional income:
The 50% Pension Income Rule:
For the person in receipt of care support, then obviously the Local Authority will take their income, from various sources, into account.
It is well established that a spouse still living at home can take up to 50% of the person in care’s pension, if they don’t have anything to live on. This was legislation originally written in to protect the married woman who was left at home but didn’t have any assets or income of their own – all being in the husband’s name.
What is less clear, and is not accounted for in the guidance, is what if that person still living at home has assets or specifically a private pension for instance that they have not drawn down on. It is like that the Financial Assessment will miss the spouse’s assets in this instance as they will only ask about the person in care’s financial situation. Something to look out for and take advice on if approaching a Financial Assessment with the Local Authority.
Lifetime Mortgages:
A regular drawdown from a lifetime mortgage is usually assess 50:50, especially if the property is owned jointly between a husband and wife. Here, the ‘income’ could be missed by the Local Authority if it is being paid into a different account, say the spouse who is not in need of care or a third party for that matter.
The Local Authority will usually regard a regular withdrawal as ‘income’ if there is a pattern of payment – so the same amount on the same day, perhaps over weeks, months or even an annual payment.
Investment Bonds:
It is well established in law that investment bonds (those with a life insurance element) are disregarded (or should be) by the Local Authority during Financial Assessments for care funding.
Obviously if there is an anticipation of care needs, then new investment bonds cannot be disregarded as the investment would be seen as deliberate deprivation of assets.
Take care when taking investment advice – always use a later life financial planning specialist who understands the nuances around the rules. If you move assets from a disregarded investment bond into another product, such as an ISA, then you will lose this protection, and it will be included in any Financial Assessment.
It should be ok and still treated as disregarded, by switching from a disregarded investment bond to another, new disregarded investment bond. Just ensure you take proper professional advice and that the switch is properly documented.
Finally, it must be remembered that this particular rule is at the top of the Department of Health & Social Care’s wish list to have removed – always keep your investments and related financial needs and goals under review.
Deliberate Deprivation:
If someone with minor health conditions wishes to gift to charity and family, at what point would this be considered deprivation of assets? They don't need care currently and have a large estate. With their current health situation, they may never need care. In this instance, if there is a regular pattern of gifting and charity donations then it's unlikely to be considered deprivation of assets.
As to whether a Deed of Variation is treated as deliberate deprivation is a bit of a grey area. If it is done before they have care and support needs then it is less likely to be classed as deprivation, however if they already have care and support needs then it is likely to be classed as deprivation.
Harold Stephens
Harold Stephens is a local, later life financial and legal planning specialist with a special interest in long-term care provision and tax efficient funding options. If you, or your loved one, are at the point of care need and are currently making important care funding decision then get in touch now for an initial chat with one of our specialist advisers by calling 0117 3636 212 or emailing office@haroldstephens.co.uk.
We will also be putting on some in person events throughout October and November in the local area covering the topic of care funding decisions and related later life financial and legal planning. Event details are updated regularly here: https://www.haroldstephens.co.uk/events/
