Long Term Care Planning

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Long-Term Care Planning – An Overview

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Long-Term Care (“LTC”) Planning is widely regarded as the most complex and uncertain area of later-life planning.

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Unlike inheritance tax planning, which operates according to nationally defined rules applied uniformly across the UK, long-term care funding is administered by local authorities. While they are required to apply the same statutory framework, experience shows that interpretation and application can vary significantly between authorities.

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This uncertainty, combined with the potentially open-ended duration of care, makes early and structured planning essential.

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The Core Challenge: Uncertainty and Cost

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One of the greatest difficulties in LTC planning is that no one can reliably predict how long care will be required. A person entering care may need support for a matter of months, or for many years.

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Independent research has shown that the average cost of residential care in the UK has historically exceeded £30,000 per annum, with nursing care often costing significantly more. Fees continue to rise and vary widely by region and level of care required.

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For individuals whose primary asset is their home, this presents a stark reality. Where care costs must be met from capital, property values can be eroded rapidly, leaving little or nothing to pass to family members.

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How Local Authorities Assess Ability to Pay

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Social care is a devolved matter across the UK, meaning that England, Scotland, Wales, and Northern Ireland operate under slightly different rules. However, the general approach to assessing eligibility for local authority support follows a similar

pattern.

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This typically involves:

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1. A capital assessment, looking at savings, investments, and in some cases property

2. An income assessment, including pensions and other regular income

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The assessment also depends on whether care is received:

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• In the individual’s own home

• In a residential care home

• In a nursing home

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In many circumstances, the value of a person’s home may be taken into account once no qualifying person continues to live there.

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Historically, individuals with capital above an upper threshold (for example £23,250 in England in earlier years) have been required to fund their own care in full. Where capital falls between lower and upper thresholds, a notional contribution—often referred to as tariff income—is applied. Capital below the lower threshold may be disregarded, though this amount is relatively modest when compared to typical property values.

 

Deprivation of Assets: A Critical Warning

 

At this point, it is essential to address the deprivation of assets rules.

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Simply giving away assets or transferring property in order to reduce care fees is highly likely to be challenged. Local authorities have wide powers to examine past transactions and, where deprivation is established, to treat assets as though they were still owned.

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As widely explained by Age UK, deprivation of assets occurs where an individual has intentionally reduced their assets in order to lower their contribution towards care costs. Importantly, assets may still be treated as belonging to the individual notionally, even if they no longer legally own them.

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Examples commonly cited as potential deprivation include:

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• Gifting money or property

• Transferring property ownership

• Placing assets into irrevocable trusts

• Sudden or uncharacteristic spending

• Converting assets into exempt forms

• Certain investment structures

 

The test applied is evidence-based, focusing on both foreseeability and intention. Where care needs were reasonably foreseeable at the time of the transaction, attempts to shelter assets are unlikely to succeed.

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