My ex-wife, for whom I have power of attorney for financial affairs, has a dementia condition, but is otherwise in good health. She has a self-invested personal pension (Sipp) valued at over £100,000. Her named beneficiaries are our two children (now both over 50) and the Sipp is to be divided between them on an equal basis. She currently lives at home with help from the family, but it may be necessary to find more suitable, sheltered accommodation which will of course be very expensive and the likelihood is that her home would have to be sold to pay for such care.
Would her Sipp be taken into consideration by the local authority if all of the other funds/capital have been exhausted even if it has remained intact, ie uncrystallised? If she takes the 25 per cent tax-free portion and gives it to our children now would that alter the status of her remaining funds in the Sipp, ie would they automatically be taken into consideration now whereas before crystallisation they might not have been? Without consideration of her condition, do you think it would be better for the beneficiaries to wait until after death (she's over 75) and for distribution of suitable amounts post-death from her Sipp provider?
TF
Your question raises two key issues: asset deprivation and duties of an attorney.
When assessing the level of financial support available for those requiring care, local authorities do include pension assets in the financial assessment, once an individual is over state pension age of 66. As your wife is over 75, they would include her Sipp in the assessment. The value of her home is disregarded while she requires care in her own home. If she were to take withdrawals from her Sipp and give this to your sons, the local authority would disregard the gift and still count the money given as part of her assets.
The pension provider will not pay any funds to the nominated beneficiaries until after her death. As her power of attorney, you have an obligation to preserve her assets for her needs. To seek to fund a gift to your children, while she is still alive, would be viewed as contrary to your obligations and the Court of Protection could prevent this and remove you as attorney.
Help with care at home
To establish whether she is eligible for any financial support from the local authority her need for care must firstly be established. Her GP surgery should be able to start this process.
As she is in her own home and over 65, she may be eligible for attendance allowance if she needs help with daily living tasks and has done so for more than six months. This is provided at two levels, depending on the support required and whether this involves help during the day or round-the-clock. The lower level of attendance allowance is £60 a week and the higher rate £89.60. Attendance allowance is not means-tested and is tax-free. The application process can be started by calling 0800 731 0122.
Depending on her other income, if she makes a successful claim for attendance allowance, she may also qualify for help with council tax. If she is receiving care on a voluntary basis her carer may become eligible for carer's allowance or carer's credits.
Meeting residential care costs
Should she need to move to residential care, her attendance allowance (AA) would stop, although AA can be claimed if an individual pays for all the care home costs out of their own income, but once her need for care has been established, other help is available if her income is not enough to support the fees.
After 12 weeks residency, her home is included in the capital to be assessed. The value of her home would only be disregarded from the means test if it is also the home of a child under 16, another person over age 60, a spouse or civil partner, or someone living with disabilities.
All her income would be assessed, unless she has a spouse or partner, when 50 per cent of private pension income is disregarded. A deduction for personal expenses is allowed.
If there is a shortfall between the fees required and her income, then her capital is assessed. Local authority help with fees only starts once the upper threshold of capital is reached. Until then all care fees fall on the individual. Once the lower threshold is met the local authority will contribute. Where capital is between these thresholds it is assumed to produce £1 per week of income for every £250.
The thresholds in each part of the UK vary. The table below sets out the current upper and lower thresholds and weekly personal expense allowance.
*To be raised to £100,000 and £20,000 from October 2023 |
Unfortunately, there is a gap between what the local authority will pay and the fees required by care providers. This is typically 30 per cent of the cost with self-funders subsidising local-authority-funded residents. Only the local authority level of funding will count towards the proposed care cap of £86,000 in England. Additionally, all “hotel costs”, worth £12,000 a year, are also excluded from the cap and will have to be funded from private income and capital. This means that unless she qualifies for NHS continuing care, her income and some of the capital, including her Sipp will be swallowed up.
NHS funding
As dementia-related illness tends to be progressive, if her condition deteriorates, she may get help with care costs from the NHS. This could be up to £183.92 per week if the assessment of her needs requires a nursing home or could even mean that all care is provided free. With progressive conditions, an assessment should be sought frequently. Just because someone is ineligible initially, does not mean a claim may not succeed later. In severe cases of dementia, an application under the Mental Health Act, whereby an individual is sectioned, for their own and other’s safety, can mean that all costs are met by the NHS.
Opinions in this Q&A column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on authors' answers, including any loss, and exclude liability to the full extent permitted by law.
