Dramatic Reforms To How Care Is Paid For Are Only A Year Away

Government plans announced last year mean that anyone with assets of £100,000 or more will have to pay for their own care and are now only a year away from coming into force.

The changes – which come into effect in October 2023 – will see a dramatic shift in the way people pay for their care needs as they get older. Currently, in England, anyone who has assets of £23,250 or less contributes a fraction of their care costs. This figure is known as the upper capital limit, or UCL. When a person’s assets fall below £14,250 (the lower capital limit, or LCL) the local authority steps in to fully fund their care.

What is changing?

The Government’s announcement last year more than quadrupled the upper capital limit from £23,250 to £100,000. Furthermore, the lower capital limit is rising from £14,250 to £20,000.

This means that someone who has £100,000 or more of assets will fully fund their own care needs – while someone who has between £20,000 and £100,000 will make a means-tested contribution to their care.

As part of the new plans, the Government says that the amount someone will pay for their care over their lifetime will be capped at £86,000 and once that cap is reached, the local authority will fully fund care irrespective of the value of assets the person owns.

However, rent, food, and utility bills will not count towards this £86,000 cap – only costs directly associated with care.

What effect could this have?

We are, as a nation, getting older. Obviously, this means that more and more people are requiring care, whether this is at home or in care homes.

The new upper capital limit means people may have to pay for their care for a longer period and could have to sell their home if they have to move into care.

This means that couples or individuals who had planned to leave their homes to their children could well be faced with leaving very little for their loved ones to inherit.

What can you do to avoid this?

One way to avoid losing the whole value of your home is to draft Wills in which a spouse gifts half their property to their children on death while granting the surviving spouse the right to continue to live at the property. This is known as a right of occupation trust.

This means the surviving spouse’s assets will only be assessed on the half of the property they own – and this guarantees that their children will still inherit at least half of the property when the second spouse dies.