Understanding the Financial Assessment in Scotland
In Scotland, local authorities conduct a financial assessment to determine how much you should contribute towards the cost of your residential care. While free personal and nursing care are provided, accommodation fees can be substantial. For the assessment, your assets—known as 'capital'—are scrutinised, and your house's value is a significant factor unless certain conditions are met.
The Role of Capital Limits
During the financial assessment, your capital is measured against specific thresholds. For 2024/25, the capital limits are:
- Upper Capital Limit: £32,750. If your capital is above this, you are considered a 'self-funder' and responsible for paying your own care costs, although you still receive free personal and nursing care.
- Lower Capital Limit: £20,250. If your capital is below this, the local authority will pay for your care home fees.
- Between the Limits: If your capital falls between these two figures, you will be expected to contribute a portion of your capital and all your income (minus a personal allowance) towards your fees.
When is a Property Disregarded?
There are specific circumstances in which your property's value will not be included in the financial assessment. This is called a 'property disregard' and can be either temporary or indefinite.
The 12-Week Property Disregard
If you move into permanent residential care, the value of your home is automatically disregarded for the first 12 weeks. This period is designed to give you time to make arrangements for selling your property or exploring other payment options, such as a Deferred Payment Agreement. After the 12 weeks, the value will be included in the financial assessment unless an indefinite disregard applies.
Indefinite Property Disregards
An indefinite disregard means the value of your property is ignored for as long as a specific person lives there. The home's value is disregarded if it remains the main residence of a qualifying person, including:
- Your spouse, partner, or civil partner.
- A lone parent who is your estranged or divorced partner.
- A relative who is either aged 60 or over, or incapacitated.
- A child under 16 for whom you are liable to maintain.
Local Authority Discretion
Local councils in Scotland also have the discretion to disregard the value of your home in other exceptional circumstances. For example, if someone has given up their own home to care for you prior to your move into residential care, the council may decide to disregard your property's value.
Exploring Deferred Payment Agreements (DPAs)
If you are a self-funder but your capital is tied up in your property, a Deferred Payment Agreement can be a lifeline. This is a legal contract with the local authority where they effectively loan you the money to pay your care home fees. The loan is then repaid when your property is eventually sold, typically after your death. The council will place a charging order (similar to a mortgage) on your property to secure the debt. During the agreement, you may be charged interest and administration fees, and you remain responsible for maintaining and insuring the property. It's also possible to rent out your property during a DPA and use the rental income to reduce the amount owed.
Gifting Assets and 'Deliberate Deprivation'
It is a common misconception that you can simply give away your house or other assets to avoid paying care home fees. Local authorities are well-versed in identifying 'deliberate deprivation' of capital, which is when assets are given away to reduce the amount you are assessed as needing to pay for care. If this is proven, the council can still treat you as if you still own the asset and will include its value in your financial assessment. They can also take legal action against the person who received the gift to recover the costs.
Using a Liferent Will for Asset Protection
For married couples who jointly own their house, a liferent will can provide a degree of protection. This type of will leaves the first-to-die's share of the house in a trust, allowing the surviving partner to continue living there for their lifetime. This protects half the property's value from being included in a financial assessment if the surviving partner later requires residential care. It's a more robust option than a lifetime gift, though it does not protect the survivor's half of the property's value.
Comparison of Options for Funding Care with Property
| Option | Description | Pros | Cons |
|---|---|---|---|
| Selling the Home | Selling your property to fund your care costs. | Provides a lump sum of capital for immediate use. | Can be stressful and emotionally difficult. May not be necessary. |
| Deferred Payment Agreement (DPA) | The local council pays your care fees as a loan, repaid when your property is sold. | No need to sell the house immediately; provides financial security. | Interest and administration fees apply; debt is secured against your home. |
| Renting the Home | Renting out your property to generate income to pay for care. | Provides a regular income stream; avoids immediate sale. | Becoming a landlord has responsibilities; rental income is taxable. |
| Liferent Will | For couples, putting the first-to-die's share of the house in trust. | Can protect half of the property's value from care costs. | Only protects half; requires legal setup and is not suitable for everyone. |
Seeking Professional Guidance
Care funding can be a complex and emotionally draining process. To ensure you make the best decisions for your financial security and your family's future, it is highly recommended to seek professional advice from an independent financial adviser specialising in later life planning or a solicitor with expertise in elder law. Organisations such as Age Scotland can also provide invaluable guidance and support.
Conclusion: Informed Choices for a Secure Future
In Scotland, your house is a significant factor in your financial assessment for care home fees, but it is not automatically lost. By understanding the rules around property disregards, deferred payment agreements, and other asset protection strategies, you can make informed decisions. While the situation can be challenging, exploring your options with professional advice can provide clarity and a secure path forward. Early planning is key to navigating these complex issues successfully.
