Understanding Means Testing for Care
Paying for care is often thought to be complex and confusing, and as such there are many misconceptions about the ways in which people are expected to pay for care homes.
When beginning your research into care homes, and the ways to fund them, it’s important to ensure you have solid, reliable information for you to make an informed decision.
We’ll explore what financial means testing for care homes is, how this works in practice, and answer some frequently asked questions.
The Financial Means Test
After the initial care needs assessment, which explores the level of care required as well as the appropriate delivery of said care, is the integral financial element, known as the financial means test.
In essence, this focuses on the actual monetary cost of the agreed level of care. The means test exists to calculate what includable financial resources from capital (savings) and/or regular net income the care home resident has.
Essentially, the assessment is there to consider how much money a person has and whether the local council will make an ongoing contribution towards their care.
How Does a Financial Care Means Test Work?
Once the initial care needs assessment has been conducted, identifying the physical, emotional, and social care requirements, bespoke a care plan is developed outlining the level of support that will be provided.
The next stage will be the means test, which will be conducted by a Financial Assessment Officer. They concentrate on an individual’s personal circumstances, looking at:
- Cash Savings
- Funds held on deposit in a building society, bank, ISA.
- Stocks & Shares
- There are occasions when a person’s main property is excluded
- Regular Earnings
- State, Occupational and Private Pensions
- State and NHS Benefits
Once all the relevant information has been collected, the council will be able to calculate how much, if any, they will contribute towards the cost of the care and support.
How Do Assets Affect A Financial Assessment for Care?
The more money or assets a person has, the more someone will be expected to pay towards the cost of their care.
There is also the possibility they may not be eligible to any local authority assistance with the cost of care.
How Much Will You Be Expected to Pay After Means Testing for Care Costs?
Once the care assessment has taken place, the care plan has been developed and the financial assessment has been conducted, the local council will then be in touch with written confirmation of their decision on how much you’ll be expected to pay.
The amount you’ll be expected to pay will vary depending on:
- The level of care needed and its associated cost
- The type and style of chosen care home
- The actual weekly cost of the chosen care home
- A person’s financial circumstances
To determine whether or not a person is eligible for a financial contribution from their local authority the current national rules apply to the financial means test (in England):
- If a person’s includable capital is over the upper threshold level of £23,250 they are likely to be classed as a “self-funder” and will be required to pay for their care costs in full without any funding from their local authority.
- If the includable capital is less than the lower threshold of £14,250 then a person is not classed as a self-funder and the local authority will pay towards that care.
- However, this contribution will only be made up to a council’s own maximum weekly amount and this is minus the majority of resident’s income.
- The resident is able to retain a specified amount for incidental expenditure. Known as the Personal Expenses Allowance (PEA) and currently set at £25.65 per week (2022/23 in England).
- During the interim period when a person’s capital falls between the two threshold levels, an amount known as “tariff income” is deducted from the council’s contribution. A person is deemed to have £1 in tariff income for every £250 of capital.
Deliberate Deprivation of Assets
Many people assume that giving away some savings, or property will positively influence the outcome of their financial assessment. However, depending on when and why the gift was initially made the local council may deem this transaction as a deliberate deprivation of assets.
If the local authority believes that the gift was an act of deliberate asset deprivation, they will assume that the care recipient still owns the capital, this is known as notional capital.
The local authority will treat the care home resident as a self-funder until the full monetary value of the notional capital has been depleted.
Means Testing for Care FAQs
What documents will I need to collect for a financial assessment for care?
Before you have a financial assessment for care, it’s a good idea to gather the information you’ll need beforehand. This saves time and additional stress.
Some of the details the Financial Assessment Officer might request are:
- Total sum of savings in bank accounts, building societies, ISAs, and premium bonds
- Any stocks and shares
- Property or land you own
It’s also a good idea to gather any information about disability-related expenses you receive.
What happens if I gift assets before a care means test?
If the local authority believes that you have gifted or transferred assets to a relative or a charity to avoid or reduce the costs, you’d have to pay towards the cost of care homes, it’s classed as a deprivation of assets.
The local authority could instead, still treat it as though you own the value of those assets, otherwise known as ‘notion capital.’ You could then be treated as self-funding, even if you don’t have assets above the £23,250 threshold.
Is there a banding system to know whether I’d have to self-fund for care?
There is a system in place to ensure self-funding and means testing for care costs is a fair process. The rules are as follows:
- If your capital is over £23,250, you will be classed as a self-funder and will be required to pay for your care costs in full.
- If your capital is between £14,250 and £23,250 then you will contribute towards your care fees from your income which is included in the means test. You’ll also be expected to pay a ‘tariff’ income based on your capital.
- If your capital is less than £14,250 then you will not be required to pay the ‘tariff’ income but will continue contributing to your care costs which would be included in the financial assessment for care. The local authority will pay for the remaining cost of your care.
We have more helpful information on funding and finance here, or read more about who pays for care homes in on our blog. Alternatively, get in touch with us today to speak with one of our helpful advisors.