It is widely believed that long term care is free in Scotland but this isn't the case.
There is a non-means tested contribution from the local authority for those needing personal or nursing care which, as at time of writing, is £249 per week.
Although £12,978 per year may sound generous, typical costs for a care home in Edinburgh can range from £36,000 - £60,000 per year, leaving an annual shortfall of at least £23,000. Comprehensive Care at Home costs can be similar or even more.
So who pays the difference?
This depends on the financial situation of the person requiring care. The Local Authority carries out a financial assessment covering both capital and income.
Most people will have some capital, ranging from a few pounds in a bank to many hundreds of thousands of pounds particularly when a property is included. However, not all assets are included in this financial assessment. The rules governing which assets need to be included are complex but can have a significant effect on the total amount payable by the person requiring care. Key exclusions include the family home if the spouse or certain other qualifying people remain in the house.
Put simply if a person requiring care has more than £26,250 (which is the current upper threshold) in accessible assets then the Local Authority will regard them as self funders and they will be responsible for paying for the shortfall in care costs.
The rules governing income assessment are again complex but broadly speaking a person will be expected to contribute all of their income (less a weekly Personal Expense Allowance of £25.80). Where the person requiring care has a personal or occupational pension in their own right and still has a spouse (or civil partner) then only 50% of that pension would need to be allocated to care.
In practice this means that many people are indeed self funders and have to face up to the stark reality that they will be responsible for the majority of their care costs. Sound financial planning can reduce the impact of these costs.
Some simple steps to consider:
• Ensure you are aware of all allowances and benefits – and then claim them.
• Make the most of what you have got – increase your income or make your capital grow – just leaving the money on deposit with a low rate of interest is unlikely to be the best solution.
• Consider specialist solutions to the problem
Specialist Solutions include Immediate Needs Annuities which offer a guaranteed tax efficient income paid to the care provider in return for a capital sum. In certain circumstances equity release might be more appropriate. This is a complex area and one where a suitably qualified adviser can be invaluable. You can read more about Care Fees Planning in our free download, or please contact us for an informal discussion.