Taking on the responsibilities of a Power of Attorney (PoA) for an elderly parent or relative often means making complex decisions at emotionally challenging times. One of the most significant responsibilities is managing the cost of care fees when your loved one is classed as a self-funder. That is, they are required to pay for their own care rather than relying on the local authority.
Local authorities will consider an individual’s income, savings, investments and property (unless disregarded) when undertaking a Financial Assessment. The Financial Assessment determines the contribution that an individual will pay towards their care costs. In England, an individual is usually considered a self-funder if their assets exceed the upper capital threshold, currently £23,250.
Care costs can vary widely depending on location and level of need, be that residential care, nursing care and/or specialist care. Fees often increase annually, so it is important to plan not just for current costs but for future rises, often in excess of the cost of living.
As an attorney, you must manage the donor’s finances prudently and transparently. This includes using the donor’s funds solely for their benefit. Careful thought needs to be given to the gifting or transferring of assets. Customary reasonable gifts on usual occasions (birthdays, Christmas) to friends, family or charities the donor supported can still be made, provided the donor would have done so and it does not harm their care. Larger gifts or those outside these norms require explicit authority in the Lasting Power of Attorney or through the Court of Protection.
Deliberate deprivation of assets, the giving away of assets to avoid paying for care, can be challenged by local authorities, with the power to look back indefinitely over past transactions to see if there has been any intent to avoid care charges at the time of the payment.
Even if someone is self-funding, they may still be entitled to some support. Attendance Allowance is a benefit paid to those who have reached state pension age and require oversight or care during the day, night, or both. The current allowance at the higher rate is £5,740.80 per year. Less frequent, but worthwhile exploring, is NHS Continuing Healthcare, where the NHS fully funds the healthcare package if the care needs are primarily health-related.
For individuals who have to self-fund, attorneys will need to consider the various funding options. There is no single “right” way to fund care, and many people will use a combination of options. Common approaches can include:
- Making use of cash savings, money held in the bank, building society or NS&I.
- Investing assets, although consideration needs to be given to the fact that any investment is likely to be for the benefit of someone in their late seventies or eighties. Additionally, appetite for investment risk tends to diminish with age.
- Considering whether to sell or retain a property. Renting out a property will come with its own challenges, with the expected Renters’ Rights Act coming into force from May 2026. However, any rental income generated can go towards subsidising care fees, and there is the upside of potential capital appreciation on the property.
- Investigating insurance arrangements to cover the cost of care fees, such as an Immediate Needs Annuity, as a way of ensuring assets are not exhausted during the lifetime of the individual requiring care.
If you find yourself acting as an attorney and having to consider the most appropriate way of generating care fees for a loved one, then get in contact for an initial exploratory meeting.
