Case Study 5

Enabling an elderly person to remain at home

The situation

M r E is a widower in his 80s with two daughters. His health has deteriorated to the extent that he needs daily care and support. He and his daughters are adamant that he wishes to remain in his home and to receive care there, rather than move into residential care.

However, receiving care at home for a number of years had reduced his assessable capital to below the current threshold at which responsibility for paying for the care passes to his local authority.

We became involved following an assessment of Mr E’s care needs and his finances by his local authority. They had initially determined that Mr E’s needs would be best met in a care home, but following a determined argument by his daughters and a third party expert it was decided that care could be provided at home.

The local authority agreed to provide a certain amount of funding, but this was insufficient to pay for the level of care which the daughters felt was appropriate, or to pay the rates charged by the agency currently engaged. The third party expert advised that the local authority was acting lawfully in capping the funding offered.

Mr E’s income was insufficient to meet the shortfall, and neither daughter had sufficient funds. They contacted us to discuss an equity release loan against Mr E’s home to meet the gap. We noticed, however, that Mr E owned four insurance bond investments - which, if arranged appropriately, are not assessable by the local authority.

Indeed, the local authority had rightfully ignored them during their financial assessment. If the insurance bonds had been encashed or even if Mr E had withdrawn from them piecemeal, the funds raised would have immediately been assessable, Mr E’s assessable funds would have gone straight back above the threshold limit and the local authority would have withdrawn its funding.

In any event as the law stands Mr E was unable to “top up” the local authority funding by using his own resources. Top up has to be paid by a third party.

He could have given the bonds to his daughters. This would, however have resulted in him losing control over his money. One of the daughters was suffering marital difficulties and any gift could immediately have resulted in a claim by her husband.

The solution

After discussing the matter with all concerned we arranged for Mr E to gift the bonds to a trust for the potential benefit of himself and his daughters. The nature of the trust preserved the exemption of the capital held from assessment by the local authority and protected against any claim by the daughter’s husband. Once the bonds were in the trust, the daughters and Mr E’s solicitor, as trustees, were able to access the funds as required and use them to fund a third party top up.

The arrangement was put to the local authority which agreed that, as the insurance bonds were exempt from assessment at the point they were assigned to the trust, there was no possibility that it could fall foul of the rules regarding “intentional deprivation of capital”.

The outcome

The funds in the trust continued to be exempt from assessment by the local authority and were protected against any claim by Mr E’s son in law. Mr E was able to receive care at home from his preferred agency. The local authority continued to meet most of the cost of that care and funds were made available to meet the shortfall without the need to borrow money at relatively high rates of interest through equity release.