LONG TERM CARE (SCOTLAND)
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
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
If it is decided that residential care is needed, then the local
authority has a duty to provide it.
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
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
Carer who has given up their own home to take care of the individual
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
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
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
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.
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
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
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
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.