Advances in medical science mean that more elderly clients will be entering nursing or residential care homes and many will be paying for this privately from the proceeds of their former homes.

The need for care often arises when least expected, and many clients and their relatives not familiar with the care system will be faced with problems and the need to make decisions on matters of which they have very little understanding.On 1 April 1993, the central government funding for community care was passed onto local authorities.

With this transfer came a set of rules which involve financial and legal implications on which clients will need advice, particularly the elderly entering nursing or residential care homes.Prior to April 1993, eligibility for financial assistance with nursing home or residential care fees depended only on the client's ability to pay; no account was taken of whether the need for care existed.Clients who entered care homes prior to April who owned a property were entitled to claim income support towards the cost of the accommodation fees whilst their property was marketed for sale.

The statutory period allowed for this support to continue was 26 weeks after ceasing occupancy.

This period was normally extended if the property remained unsold, often for several years or the remainder of the client's life, without the DSS imposing any charge on the capital value.Therefore, prior to April 1993, many clients could choose to enter residential care or nursing homes whether or not the need existed, have the fees paid by the state and leave an inheritance to the family in the form of property.However, since last April, those who wish to enter care homes have to undergo two assessments by local authority social services departments to qualify for financial support from local authority budgets.

First, a new assessment to determine the need for care; and, secondly, a financial assessment.Since April 1993, the local authority social services department has had a duty under s.47 of the NHS and Community Care Act 1990 to assess a client's need for community care services if the need for such assessment becomes apparent.

S.21 of the National Assistance Act 1948 imposes on local authorities the responsibility for providing residential accommodation for persons who, by reason of age, illness, disability and any other circumstances, are in need of care and attention which is not available to them.

This accommodation may be provided in residential care homes, nursing homes or local authority part III accommodation depending on the need.S.26(2) of the National Assistance Act 1948 requires local au thorities to set a standard charge for accommodation in homes not managed by the local authority, to be equal to the gross cost to the local authority of providing or purchasing the accommodation under a contract with the independent sector.Once a client has been assessed as needing care, the local authority has a legal obligation to provide it and will assess the client's ability to pay the standard charge using the rules set out in the National Assistance (Assessment or Resources) Regulations 1992.The regulations in assessing a client's ability to pay are similar to those for the previous income support funding.

Financial support towards the standard charge may be available to those with capital below £8000.Clients entering permanent care homes will be able to claim income support at the same rate as if they were living at home plus a residential allowance of £45.

Claims for attendance allowance should be made in the normal way although this will cease after four weeks of receiving local authority financial support.

Income support is added to a client's income when assessing his or her ability to pay.As far as property is concerned, in many cases it will be treated as capital.

One of the most important implications of applying for local authority support is the authority's power to levy a charge against unsold property of the client for the cost of care it has incurred.Where a client has a beneficial interest in land which remains unsold and fails to pay the assessed standard charge, the local authority can, without consent, create a legal charge against the property to recover the cost of care it has provided.

This charge will be settled when the property is eventually sold and may also be subject to interest if the client dies in the meantime (s.22 of the Health and Social Services and Social Security Adjudications Act 1983).Property is disregarded if it remains occupied by the client's former partner, or relative who is aged 60 or over or who is incapacitated.

Property may also be disregarded at the discretion of the local authority in exceptional circumstances, if, for example, it is the sole residence of a previous carer or companion of the client who had given up their own home.The local authority may consider that a client has deprived him or herself of capital in order to reduce his accommodation charge.

The transfer of an asset at any time may be identified as an intention to avoid accommodation charges.If the local authority decides that a client has disposed of capital to avoid accommodation charges it may then treat the client as having notional capital and can recover the assessed charge for accommodation from either the client or, if the transfer took place within the previous six months, from the person to whom the capital was transferred.This charge will continue until the notional capital has been reduced to an amount which will entitle the client to local authority support.Trust funds will be examined to identify the type of trust and the client's entitlement to both capital and income.

The assessed charge will depend on these entitlements whether paid to the client or not.Certain incomes can be either partially or totally disregarded, but in general most forms of income are taken into account when assessing the charge for accommodation.Where a spouse of the client is in receipt of income support, the local authority will not pursue a contribution towards the accommodation of the client.Where the financial circumstances of a spouse appear to enable him or her to make a contribution towar ds the costs of accommodation, the local authority will agree a reasonable amount to be paid, taking into account all his or her circumstances so as not to cause hardship.Where one or both members of a couple are admitted to residential accommodation, assessment is carried out on their individual financial resources in accordance with the normal rules including those relating to liable relatives.

Where both parties are admitted to the same residential care or nursing home, it would be normal to assess them as a couple and aggregate their resources as if they were living in one household.The exception to this may be where they are living in different wings of the home, ie a nursing wing and a residential wing.In assessing the client's ability to pay, the local authority is required to ensure that he or she retains an amount for personal expenses as laid down in the regulations.Normally, the client's assessed charge will be collected from him or her by the local authority, who will then pay the home owner the total agreed fee or, by arrangement and agreement with all parties involved, the assessed charge may be paid direct to the home owner with the local authority making up the balance.

However, the local authority will remain responsible for the full amount of the care fees should the client fail to pay his or her assessed charge.Since April 1993 clients entering care are advised to undergo a voluntary needs assessment with the local authority if they wish their nursing home or residential care fees to be restricted to the authority's standard charge, or they consider their capital may run out before the need for care ceases.Clients will be able to choose their preferred accommodation from the private or voluntary sector homes anywhere in the UK as long as it is registered.

If the chosen accommodation is more expensive than that for which the local authority would usually pay, a third party will be allowed to make up the difference; this may be subject to the third party's financial status and assessed ability to meet any top up over a long term.Applications for local authority care assessments should be made to the local authority of the area where the client is considered to be a permanent resident prior to entering care.The old income support rules will continue to apply to all persons resident in independent sector care homes before April 1993.

Therefore, those clients with capital and presently paying fees privately will be eligible to claim income support if their capital falls below £8000 in the future.

Should such persons' care needs change, ie from residential to nursing care, they will also have preserved rights to claim a higher level of income support.Clients entering care homes should be clear of what is included in the cost and should consider contracts carefully before signing.

If they are paying private care fees from limited capital, which may run out, they should ascertain whether the home will continue to accommodate them on lower income support or local authority funding.Apart from the obvious need for an elderly person to make a will, one should consider the benefits of enduring powers of attorney which will enable the family to maintain a degree of control over the client's affairs should health deteriorate during the period of care.The average length of time a resident spends in a care home exceeds three years.

Nursing Home Fees Agency (NHFA) research has found that 93% of savings or capital used to pay care fees is presently on low yielding bank or building society deposits and is very quickly exhausted, often before the need for care ceases.It is important that clients seek professional advice on alternative forms of annuities, investments or long term care fee plans to meet the rising cost of care for the remainder of their lives.

A typical case of a resident entering care may be an 80-year-old whose only source of income is his pension.

He has capital available from the sale of his house totalling £75,000, knows that he will probably need to pay care fees for at least seven years, but also wishes to leave some money to his family.One option would be to invest his money in a building society.

However, assuming current interest rates, his money would have run out after the fifth year.

He would then lose his independence and need to claim income support or local authority assistance to cover future fees thus burdening his family, or care home owner, with any shortfall in the cost and also not fulfilling his wish to leave some money.An alternative offered by the NHFA would be that of investing the £75,000 in a portfolio utilising a long term care fee plan to pay full fees for life, together with safety funds aiming to achieve capital growth.