Since 1 July 2002 all personal care at home for people residing in Scotland has been provided free-of-charge.
The cost of a care home, however, is broken down into three constituent parts: accommodation, personal care and nursing. Your local authority will make flat-rate contributions towards any personal and, if necessary, nursing care you require. A financial means test is carried out to determine whether you have to pay accommodation costs.
Personal care contributions are only made to those aged over 65. Those in receipt of this component lose any entitlement to attendance allowance or the care component of the disability living allowance.
2. UNDERSTAND MEANS TESTING
People with assessable assets (including half of any jointly-held assessable assets) exceeding £24,750 have to pay in full for accommodation costs.
Those with assets between £15,250 and £24,749 receive partial support, while those with assets below £15,250 qualify for the maximum local authority contribution. Unlike south of the Border, this rate does not vary from one local authority to another.
3. LOOK AT THE COSTS
The average cost of a nursing home in the UK is £672 a week or £34,944 a year. The average cost of care in your own home is £358 a week or £18,200 a year. How long would it take for your life savings to be spent?
4. WEIGH UP PRIORITIES
What is important to you as you get older? It may be continuing to live in your own home, protecting your assets to pass down to children and grandchildren or even something as simple as retaining social relationships with friends and family.
5. PROTECT YOUR ASSETS
If passing an inheritance to the next generation is a priority you should think about gifting any assets in early life, either directly or into a trust for beneficiaries.
The earlier you plan, the better: local authorities take a dim view of those deemed to be depriving assets purely to get around paying long-term care costs. If they suspect this to be the case, they may decide to treat you as if you still own these assets.
If, however, gifts were made when you were fit and healthy and had no expectation that care would be required, the local authority could not consider this deprivation.
6. RESTRUCTURE ASSETS
Not all of your assets are means tested. The surrender value of any life insurance policy is disregarded under current rules. This means that most investment bonds (since they contain an element of life insurance) are not included.
Consider taking out investment bonds to provide a tax-deferred income, as well as protecting assets. It is also possible to restructure the ownership of your home so that instead of owning it jointly each spouse owns a separate share.
The outcome of this is that if your spouse died while you were in care, half the property would go to a trust and you would be left owning only half of the property. The local authority would not be able to force a sale unless the trustees agreed.
7. EXPLORE FUNDING OPTIONS
There are many ways to fund care costs. Equity release from property, direct drawdown from pension funds, enhanced or fixed-term annuities, long-term care insurance plans or simply using your savings and investments are all ways of paying future care costs. They all have pros and cons and the right option for you will depend on your objectives.
8. UPDATE YOUR WILL
Having an up-to-date will to express your wishes on death is important, but many people also use their wills to plan for long-term care. A will, in conjunction with trusts, can provide a means of eliminating capital from a survivor’s estate which may otherwise be assessable to pay long-term care fees.
9. USE POWER OF ATTORNEY
In addition to making a will, you should also make a lasting power of attorney in case you become unable to manage your own affairs. Should you lose the mental capacity to make important decisions this legal document will allow someone to make them on your behalf.
10. SEEK FINANCIAL ADVICE
It is important to get professional advice from a qualified financial adviser. From the start of 2013 advisers who want to remain “independent” have to be able to deal with long-term care cases, either by being suitably qualified to give advice or being able to refer them to someone who is.