Murray Beith Murray LLP is a leading Scottish private client law firm.
For 175 years we have specialised in meeting the legal, financial and administrative needs of individuals and families, family trusts, charities and private companies.
Murray Beith Murray LLP is a leading Scottish private client law firm.
For 175 years we have specialised in meeting the legal, financial and administrative needs of individuals and families, family trusts, charities and private companies.
When you grow old, you will usually want to see out your days in your own home with your faculties still intact. Regrettably, some older people will spend their last days as a resident in a care home. In fact, in Scotland, as of 31 March 2022 (the latest release of these statistics), there were 30,552 older people who were residents in care homes for adults.
Getting older and needing help to look after yourself has consequences. Clearly, there are the practical day to day living consequences. There are also financial consequences.
If you have sufficient wealth or have made provision for care costs, the question of the cost of care provision might be academic. However, for most people, the cost of care can have a significant impact on the value of their assets, investments and property.
To qualify for free residential care, your capital reserves will fall below £20,250. If you have more than that but less than £32,750, you will likely have to make a partial contribution towards your care. If you have capital exceeds £32,750, you will need to pay for your own cost of care.
In addition, in Scotland, the local authority will contribute towards your residential or nursing care. For the financial year 2023/24, the contributions are as follows:
You then need to compare those contributions to the actual cost of care. These costs will vary depending on the care home you select as well as the level of care you need. In every case, however, they will exceed the contribution you receive.
If you do become a permanent resident in a care home, or require care at home, and have capital above the higher capital limit, you will need to pay for your own care costs. Depending on your income levels, the cost of your care may well start to deplete your capital reserves.
To determine what needs to be done to meet the cost of your care, you need to calculate the extent of your property, assets and investments, including any cash in the bank. Clearly, any debts you have by way of mortgage or loan, HP or credit card debts should be deducted from your total assets, property and investments.
Once you have undertaken cash-flow modeling (i.e. establishing your expected income levels at a later date) and arrive at your total net worth, you will have a clearer view as to whether your care costs are covered by your income or will need to be subsidised by your capital reserves.
How you deal with your house will depend on whether you own it outright or with someone else and whether someone else needs to live in the house.
If you live on your own, you may decide to sell your house and pay for your care costs from the proceeds of that sale. Alternatively, you might decide to retain ownership of the house and pay for your care out of your savings and other assets.
If someone else needs to continue living in the house even though you have gone into a care home, clearly, you would not wish the house to be sold. At this point we need to consider in whose name the title to the house is held. If it is the joint names of you and someone else, only your share in the value of the house can be considered.
In such circumstances, if your care costs are dependent on realising the value of your share in a house, the local authority may enter into a Deferred Payment Agreement. This means the local authority would pay for your care until the house is eventually sold, recovering the costs from your share of the sale proceeds.
You may also choose to pay for your care out of savings or other property, assets or investments you have amassed over the years. This allows you to liquidate your assets as and when necessary to meet the cost of your care.
Regular weekly charges for care costs will very quickly add up and eat into your wealth. This will continue as long as you are resident of a care home, and the value of your estate will only be established on your death.
Your family may be upset or even angry that your hard-won wealth has been depleted because of your having to avail yourself of residential or nursing care.
You may think you can get around the rules by divesting yourself of your capital before you enter residential or nursing care. Should you do that, the local authority may decide that you have deprived yourself of capital with the aim of reducing your liability to pay for your care.
Some examples of deprivation of assets might be:
Should the local authority make such an assessment, they may set a notional capital figure representing the value of the assets you no longer own. They will then use this assessment to determine whether to make any contribution towards your care.
If you have concerns or queries regarding your later life planning we have solicitors who are well versed in advising clients on the benefits and pitfalls of planning for long-term care. Their aim is to help you take a realistic approach and deal with what is possible for your future benefit.
Kathryn Johnston is an Associate within Murray Beith Murray Asset Protection group and is an estate planning specialist. If you would like to discuss any of the issues covered in this article, or if you require assistance with any other matter, please complete our contact form or call us on 0131 225 1200.
Murray Beith Murray was established in 1849 as advisors for generations of clients, committed to our values of integrity, expertise and trust. This aim and these values continue to this day, as does our commitment to be here when you need us.
