How financial assessments work with a dementia diagnosis
When a person with dementia requires residential care, the first step is usually a needs assessment conducted by the local authority. This determines the type of care required. Following this, a financial assessment (or means test) is performed to evaluate how much the person must contribute towards their care.
The means test and its thresholds
The local authority reviews the individual's income and capital to see if they fall above or below a specific threshold. These thresholds determine whether the local authority will contribute to the cost of care. For example, if your capital is above the upper limit, you are expected to self-fund your care entirely until your capital falls below this amount. If your capital is below the lower limit, the local authority will cover all your care costs (though a contribution from income may be required). For those in between, a sliding scale contribution is calculated.
Capital typically includes:
- Savings and investments
- Property (including your home)
- Pensions and other assets
Income includes:
- State pensions
- Other pension payments
- Benefits
It's important to remember that having a dementia diagnosis does not automatically exempt you from this process. It is your financial situation, as assessed through this test, that is the deciding factor.
When the local authority will pay for your care
If the financial assessment reveals that a person with dementia has capital and income below the set thresholds, the local authority will arrange and fund their care. They are obligated to provide a care home placement that meets the person's assessed needs. However, the local authority will only pay their standard rate, which might not be enough for a preferred care home. In such cases, a 'top-up' fee, paid by a third party (like a family member), may be required.
What happens if you own your home?
The home is one of the most significant assets considered during the financial assessment. Its value is included unless certain conditions are met, such as if a spouse or dependent relative still lives there. If the person is in long-term residential care and no one else lives in the property, its value will be counted after a 12-week grace period. This often leads to a situation where the family must sell the home to pay for care. Alternatively, a deferred payment agreement can be set up, allowing the local authority to cover the costs, with the debt repaid from the property sale later.
Can you get help from the NHS?
Yes, in certain circumstances, the NHS may cover care costs. This is known as NHS Continuing Healthcare (CHC) and is not means-tested. To be eligible, a person's primary need for care must be due to a complex medical condition, not social care. A person with dementia might be eligible if their needs are extensive, complex, or unpredictable. A full assessment by the NHS is required. Even if a person with dementia does not qualify for full CHC, they may still be eligible for NHS-funded Nursing Care (FNC), a weekly payment made by the NHS towards the cost of registered nursing care in a care home.
NHS Continuing Healthcare vs. Local Authority Funding
| Feature | NHS Continuing Healthcare (CHC) | Local Authority Funding |
|---|---|---|
| Funding Source | National Health Service (NHS) | Local Authority (means-tested) |
| Basis for Funding | Primary health needs | Social care needs |
| Means-Tested? | No | Yes |
| Coverage | All care, including accommodation, if eligible | Care up to their standard rate, if eligible |
| Who Arranges Care | NHS | Local Authority |
| Review Process | Regular reassessments | Regular financial and needs reviews |
Understanding asset deprivation and its implications
Asset deprivation occurs when a person intentionally reduces their assets to avoid paying for care home fees. A local authority will investigate if they suspect assets were deliberately given away. The authority can then act as if the person still owns the asset. Actions that might be considered deprivation include giving away property, transferring large sums of money to family, or spending money recklessly. With a dementia diagnosis, the timing of these actions is crucial, as the person's mental capacity at the time of transfer will be a key consideration.
Planning ahead for future care costs
Financial planning can significantly ease the burden of care home fees. Key steps include:
- Setting up a Lasting Power of Attorney (LPA): An LPA for property and financial affairs allows a trusted person to make decisions on your behalf if you lose mental capacity. This is critical for managing finances related to care.
- Long-Term Care Insurance: Purchasing long-term care insurance can help cover future costs. Policies vary, so it's essential to research and understand the coverage.
- Reviewing Savings and Investments: A financial advisor can help structure assets to provide for future care while protecting as much as possible for inheritance.
- Equity Release: If appropriate, releasing equity from your home can be an option, though this has significant implications and should be considered carefully.
Navigating the financial maze of dementia care is challenging, but understanding your rights and options is the first step towards a manageable solution.
To learn more about your rights and options, consult the official guidance provided by the UK Government on paying for residential care.
