LONG TERM CARE (SCOTLAND)

(For information relating to England and Wales please telephone us direct).

Long term care of the elderly has been the responsibility of the local authorities since 1993.

What has emerged over the period since then is that different local authorities apply the applicable rules in different ways and this can affect the level of care which an elderly person might expect to receive. Significantly, for our purposes, the approach to how that care will be funded is also fragmented in the sense that some authorities are more robust than others in how they make their assessment for funding and what they might perceive as deprivation by an individual of their assets to avoid having to pay for that care.

In 2004, there were 1,097,000 people in Scotland over the age of 60 - just over 21% of the population, and it is estimated that by 2031 the figure will rise to 1.5 million.

The Scottish Executive introduced the Community Care and Health (Scotland) Act 2002, and made provision for free personal and nursing care, the entitlement to which depends upon the age of the individual and whether they live in a care home or in their own home. These payments are NOT means tested.

These payments do not cover the costs of accommodation and living costs - the funding for accommodation and living costs will be determined following an assessment of the individual’s capital and income, the outcome of which may be that the individual is entitled to have all costs met, a proportion of them, or is deemed to be entirely self funding.

CARE ASSESSMENTS -
The local authority has a duty to assess an individual’s care needs if it appears that they require community care services - section 12A of the Social Work (Scotland) Act 1968.

Once the care needs have been assessed, the local authority then makes a decision about what services will be offered taking into account the views of the individual and those of any carer they have.

If it is decided that residential care is needed, then the local authority has a duty to provide it.

LIMITS -
If an individual has capital in excess of £22,750, they will not receive any assistance from the local authority towards their living costs, they are self-funding.

Between £14,000 and £22,750, the individual is required to make a contribution from their capital and income.

Capital below £14,000 is not taken into account, although the individual will be required to make a contribution from income.

The assessment of capital provisions are covered by the NATIONAL ASSISTANCE (ASSESSMENT OF RESOURCES) REGULATIONS 1992.

“CAPITAL” - includes bank and building society accounts, national savings, stocks, shares and the interest in the house.

Capital may be ACTUAL or NOTIONAL

DISREGARDED CAPITAL -
Some capital is disregarded e.g the surrender value of life policies, personal injuries payments, some personal items such as valuable paintings and antiques, the future interest in a trust and capital in a discretionary trust in which the individual is a potential beneficiary.

THE HOME -
The value of the home is disregarded in a situation where one or more of the following continue/s to live in the house:
• When the individuals spouse or civil partner or partner (living as husband and wife) continues to live in the house
• Relative aged 60 or over
• Relative under 60 who is disabled or incapacitated
• Dependant relative under 16
• A divorced or estranged partner who is a lone parent with a dependant child
• Carer who has given up their own home to take care of the individual in question
• The first 12 weeks of any stay in a care home - introduced by the Health and Social Care Act 2001

The local authority also has discretion to disregard the value of the home where a person other than specified above continues to occupy the home and it is reasonable to do so - this is another instance where different local authorities will differ in their approach and even perhaps at different times within the same local authority area.

NOTIONAL CAPITAL -
Regulation 25 of the 1992 regulations allows the Local Authority to treat someone as still being in possession of certain capital where that capital has been disposed of to avoid payment of care costs. The main issue is preserving your estate for the benefit of loved ones and future generations. Your Willwriter, Estate Planner or Financial Adviser should discuss with you the means of protecting this asset.

TIME LIMITS -
There is often confusion in respect of the time limits which apply in a situation where someone has disposed of an asset. Some believe that as long as the assets have been given away 6 months or more before the individual requires care, then they are home and dry - this is NOT the case.

The 6 month rule applies to the donee – ie if the donee received the asset within 6 months of the individual requiring care, then the local authority can recover the cost of care from the donee- Section 21 of the Health and Social Services and Adjudications Act 1983 - HASSASSA 1983.
The Local Authority cannot seek payment from the donee but they CAN seek to recover the cost of care from the DONOR and they may do so in a number of ways- see below

THERE IS NO TIME LIMIT IN RESPECT OF THE PERIOD OF TIME THE LOCAL AUTHORITY CAN LOOK BACK IN THEIR ASSESSMENT OF CAPITAL.

The Local Authority has OPTIONS available to it to secure payment:

• It can create a charge over heritable property ie the home - this is only possible where the individual still owns the property but is refusing to pay. NOTE that the Local Authority cannot force the sale of the house.
• It can resort to bankruptcy proceedings - but only in such cases where the individual has become insolvent as a consequence of depriving themselves of the asset
• It can offer a deferred payment scheme - whereby the Local Authority pays the costs in the meantime but the debt builds up and is recovered on the sale of the property or on the death of the individual.

Q: What can the individual/client do to protect their assets - their home in particular?

• They may consider making an OUTRIGHT GIFT of the asset – however the notional capital rules will apply and there may be other practical difficulties including tax consequences associated with this.

• LIFETIME TRUSTS The 6 month rule will apply to the trustees and therefore the Local Authority could seek to recover payment from them as donee.

Transfer of assets to a discretionary trust in which the client/settlor (to use the English term) is a potential beneficiary. There are IHT and CGT implications. As well as tax implications, there are the start up and ongoing costs of administering such a trust to consider - there must be active administration of a trust including preparation of accounts, annual tax returns and meetings of the trustees which must be minuted as evidence that the trustees have considered and reviewed the trust provisions. They must be seen to be exercise their discretion.

It is fair to say that different people have had different experiences in relation to what has worked and how they believe things will work in future.

Some advisers have offered and continue to offer clients LIFETIME DISCRETIONARY TRUTS as a vehicle for preserving assets against carecosts.

We have recently taken the opinion of a respected solicitor who has a special interest in this area of law. His view is that there is “no straight answer” to the question of whether a discretionary trust is effective; that over a period of years a Local Authority has its own policy for dealing with particular matters and that even within the same Local Authority, the policy can change over a period of time- depending perhaps on the financial position of the Local Authority at the time in question. Local Authorities do however appear to being taking an increasingly hard line.

There are at least two situations where Discretionary trusts have been set up – with the dwelling houses transferred to the trust - and where the Local Authority have taken the view that this was deprivation by the client of assets for the purpose of avoiding care costs - a breach of the 1992 regulations. The Local Authority simply refused to make any payment in respect of the care costs themselves - stalemate. This seems to fly in the face of the decision of Lord Hope in the Robertson v Fife Council, a case which was decided in the House of Lords. Lord Hope took the view that the local authority should first meet the need of the individual and then, and only then, assess how that need would be financed. In that case the woman transferred her home to her 3 sons in 1995 and was assessed in 1998 as requiring full time residential nursing care.

MOTIVE -
It would appear that motive for setting up the discretionary trust is treated as irrelevant by some Local Authorities who take the view that, REGARDLESS of the motive, if the EFFECT is that the individual has deprived themselves of an asset which could have been used to fund care, then that is all that they need to show. The question of motive played no part in the two leading Scottish court cases, Robertson and YULE.

In England the position may be slightly different. There the CRAG (Charging for Residential Accommodation Guide) rules appear to suggest that the Local Authority should take into account the MOTIVE behind a particular transfer before deciding whether there has been a breach of the deprivation rules - It should be noted however that the CRAG rules do NOT apply in Scotland .

THE FUTURE -
A further high profile case in Scotland would perhaps offer clearer guidance to local authorities, advisers and individuals alike.
However, given that councils are under increasing financial pressure, it seems likely that the hard line adopted by some is likely to catch on.
Many local authorities cannot afford the contributions to personal care and nursing care, far less the escalating costs associated with residential care.
Some operate waiting lists although it is illegal to do so - whilst others are prepared to ignore House of Lords judges when it comes to funding care.

Local Authorities seem now to be seeking financial assessments of individuals as soon as there is any suggestion that the person may require care - so that they can better track any movement of assets.

It would be relatively easy to move the goal posts in terms of the 6 month rule - this has been mooted before and could be revisited at any time.

OTHER OPTIONS –

• Insurance against the cost of care - where care is not imminent
• Immediate care plans - it is an impaired life annuity which is offered by several companies including GE life, PPP, Norwich Union, AXA and Partnership Assurance
• Possible use of a discretionary trust in a will by a partner so that the client does not have an absolute right.
• Liferent provisions in a will - This in my view will work well in a situation where a couple, whether married or unmarried make wills leaving each a liferent of their respective half shares in the home. The title should be checked to ensure that there is no survivorship clause in the title - the effect of which would conflict with the will (regardless of its date). This would preserve at least half the house – unless both parties require care at the same time and in the absence of any other factor which would allow the property to be disregarded (as above )
• Renting out property where the rental income can be used to meet the cost of care either entirely or in part.