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LTC – threat or opportunity?

Long-term care funding is often associated with vague guidelines and confusion on what is or is not means tested. Add to this the independent nature of local authorities and you can see why IFAs wonder what stance they should take.

The recently published royal commission report on long-term care seems now to have set out the Government&#39s stall on this issue. Longevity and ill heath are effects of medical advances and new treatments. LTC is a cost the Government cannot afford.

The Health and Social Care Act 2001 takes the responsibility of providing the nursing care away from the local authority and delivers it at the door of the NHS. From October 1, 2001 people receiving care will have that care paid for by the state.

Does this mean LTC is no longer a problem? Unfortunately not. The royal commission proposed that LTC costs would be split between living cost, housing cost and personal care.

The NHS will only meet the personal care or nursing cost where your client has assets below a certain level. Understanding the minima and the rules associated with this is key to any recommendation for this market.

The threat to clients of losing their homes to meet the added cost is real. Tens of thousands need to sell their properties each year. Can clients avoid this and what are the implications?

Planning early is the way forward. Seventy per cent of the population live in owner-occupied accommodation. From April 2001, the means-testing limit for LTC rose to £18,500. Anyone with assets exceeding the threshold will need to pay all care costs – except for any nursing costs. At best, the nursing costs will equate to £110 a week but at worst only £35 a week, or £5 a day.

These figures are likely to be determined by an assessment of the individual&#39s need for care and not by the cost of the care. This will create a new inequality.

Two people in an equal state of disability would each receive the same amount. If one of them were in a nursing home that costs £300 a week and one in another that costs £600 then the cost to each for their care would differ.

It is in planning for the shortfall where the IFA needs to display his knowledge of this market. What can or cannot a client do to protect his assets? What powers do the authorities have to readdress the position months, even years, later?

Deprivation of assets to avoid payment of fees can and has been challenged through the courts. Yule South Lanarkshire County Council is one such case. In essence, there are three ways that an authority can look to challenge deliberate deprivation and seek to recover costs.

First, S21 of the Health and Social Services and Social Security Adjudication Act 1983. This deals with, for example, gifts made to a third-party within six months of needing care and allows the authority to seek recovery from the donee.

Second, a determination order under Regulation 25 of the National Assistance (Assessment of Resources) regulations 1992. This enables gifted property to be classed as notional capital of the donor when calculating assets for means testing purposes. This deals with assets gifted more than six months before needing care. However, there is no right to seek recovery from the donee under this order.

Third is the Insolvency Act 1986. S339 could be used to make a donor bankrupt, which would enable the trustee in bankruptcy put aside gifts made within two or five years.

However, the local authority is only going to take action if they feel they will be able to recover the costs incurred in providing care. Their main area of focus is obviously the home.

Under the new proposals, it would be disregarded for means testing for the first three months, presumably to allow the individual and family to decide what is the best action to take.

Under the rules, the main home will be exempt if a partner or spouse remains in the property. This is also the case where a relative over 60, or one under 60 but incapacitated, or a dependent child under 16 live in the home.

Otherwise, the full value will be assessed. Where necessary, the authority can take out a legal charge on the property, especially where artificial ownership has been created to avoid payment.

The opportunity is clear. The need to meet LTC costs could seriously damage your client&#39s wealth. IFAs need to make long-term care an area of expertise to ensure that their clients do not suffer.

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