Paying for residential care – how does it work?

Thinking ahead to a time where you or a family member might need permanent residential care can be worrying. Finding out how it all works can make it less stressful, and help you prepare for the process.

Most people will have to pay something when it comes to financing permanent care, and it can be stressful if you’re not sure how it all works. Here’s a quick guide to the how the process works and how much you may have to pay.

NHS residential care

The process for sorting out residential care depends on who is organising it.

If the NHS or social services are arranging your care (or care for your loved one), it’s possible you won’t need to pay. NHS Continuing Healthcare is for people with ongoing healthcare needs, and is available either in a care home or your own home. If you are eligible for NHS Continuing Healthcare in a care home, then your fees are taken care of. Find out more here.

Local authority care

This involves the local authority carrying out an assessment to work out what kind of care you need. They then give you a Care Plan with recommendations on the best care for you, along with a Personal Budget to cover your needs.

A means test (sometimes called a financial assessment) is then carried out to decide how much you should contribute to the care home fees and how much they will pay.

The means test

This measures how much money you have coming in, and how much capital you have (for example, any savings or property you own). The amount you have will dictate how much you pay towards your care.

If you have a joint savings account with someone else, it will be divided equally and that amount of money will go towards the assessment. If your spouse or partner still lives in your home, this will sometimes be considered and be excluded from the means test.

Your capital

For the purposes of the means test, this covers your total savings along with any shares or property you own. It doesn’t include benefits or pensions.

  • If your capital is more than £23,250 then you are classed as self-funding, and will have to pay full fees.
  • If your capital is between £14,250 and £23,250, then it will be treated as a generated income, which will affect how much you pay.
  • If your capital is less than £14,250, it won’t be included in the means test.

Your income

Some kinds of income, such as money that comes in from pensions or specific disability benefits, might not be counted in the means test. Every other kind of income might be counted.

How much will you pay?

The local authority will use the means test to decide on how much you will pay. They will notify you in writing and explain their calculations. If you contribute towards your fees, legally you should not be left with less than £24.90 per week, which is called your Personal Expenses Allowance.

You always have a choice

If you want to live in a care home that costs more than the local authority will pay, this is simple to arrange. Someone else needs to formally commit to paying the cost, something that’s known as a third-party payment or a top up.

If you are self-funding (paying the fees yourself), and your capital decreases to less than the threshold (£23,250, then the local authority may start helping with funding. You need to ask for another assessment in plenty of time (at least a few months beforehand).

Giving away assets

Some people choose to give away some of their property, savings or income before the means test to dip beneath the threshold of £23,250 and therefore avoid higher costs. However, if a local authority has reason to believe this has happened just to pay less, then they may still include it in the assessment. This is called deprivation of assets and is a complicated process and needs more research before you go ahead.

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