Decision Date: 16 December 2024
Summary
Mr X, Mrs Y’s son-in-law, complained to the Ombudsman regarding the decision-making process of the Council when carrying out a financial assessment. He said the Council wrongly accounted for Mrs Y’s funeral plan in her financial assessment and did not have an adequate policy regarding how investment in a funeral plan should be treated. This, Mr X said, caused unnecessary distress and exacerbated his wife’s mental health issues.
What happened
Mrs Y organised a funeral plan in April 2021. When she did so, she lived in her own home and believed she had capacity to make her own financial decisions.
She then relocated to a residential care home which she self-funded as her capital was above the upper limit.
At the start of May 2023, Mr X, her son-in-law, then wrote to the Council to notify them that her capital had dipped below the upper limit and therefore she should be reassessed financially as he believed she was eligible for council-funded care.
The Council called Mr X in mid-May stating that her capital was above the upper threshold due to her funeral plan constituting notional income and therefore, she was not eligible for council funding. Mr X opposed the Council’s inclusion of Mrs Y’s funeral plan in her financial assessment.
Mr X emailed the Council regarding their decision in mid-June stating that due to his wife’s (Mrs Y’s daughter) mental health condition she would not be able to carry out her funeral requests and that this was the reason she organised her funeral plan. Additionally, he said that the funeral plan provider had informed him that the plan is held on trust to pay for a funeral and it followed that the Council should not consider the funeral plan as a deprivation of assets or as notional income.
The Council requested evidence of Mr X’s assertion that the funeral plan was held on trust multiple times, however, records show that this was never provided. They also requested a copy of the funeral plan.
The Council’s records from July stated that the Care Act 2014 does not include funeral plans in the list of disregards and therefore, they are automatically considered as a capital asset when a financial assessment is undertaken.
The records also evidenced the manager’s explanation that service users have £14,250 disregarded from a financial assessment which could cover funeral costs; if funeral plans were also disregarded this would create a financial advantage.
The Council also stated that since the funeral plan could be cancelled at any point, the money (apart from the admin fee) would be reimbursed.
The Council telephoned Mr X in August once again requesting evidence of the fact that the funeral plan was being held on trust. Mr X then emailed the Council an extract from an email from the funeral plan provider: “the plan is held in (the provider’s name) trust to be used at time of need or upon cancellation”.
The Council simply reiterated its own position.
Mr X responded in September that he had sent the funeral plan to the Council and provided the reasoning as to why it had been arranged (to prevent exacerbation of his wife’s mental health issues in the event of Mrs Y’s death), and that the Council’s access to Mrs Y’s personal wishes written in the instrument was invasive.
Within a few days, the Council responded that they did not intend to upset Mr X and his family, and that in the future, it would inform family members that they only require the financial information of the plan and could redact personal wishes. They had also confirmed with the funeral director that the plan could be cancelled at any time with a refund and thus, the Council would account for the funeral plan (subtracting the admin fee) as notional capital as per the Care Act 2014 and the Care and Support Statutory Guidance (CSSG).
Mr X remained dissatisfied and in response, the Council commissioned an independent investigator, who did not uphold the complaint about the failure to consider Mrs Y’s wishes to maintain her daughter’s mental health or the complaint regarding the Council’s inappropriate request for the full funeral plan as there was no evidence that the Council had specifically requested this.
After the findings, the Council informed Mr X that it endorsed the outcome and would not uphold his complaint. However, a local councillor wrote to the Council stating their disagreement with investigation outcomes and that Mr X had requested a copy of the policies the Council utilised when making their decision; however, these had not been provided.
The Council responded to the councillor the next day stating that Mr X had received the independent investigation report and that the complaints process had come to an end; if Mr X remained dissatisfied he could engage the Ombudsman.
What was found
When approached by the Ombudsman, the Council stated that:
- It did not dispute the rationale for Mrs Y’s arrangement of a funeral plan (regarding her daughter’s mental health).
- Mrs Y’s circumstances were “not exceptional” so as to suggest it should disregard the funeral plan from the financial assessment; she was known to adult social care since 2016 in relation to care needs [we think implying that she would have known she was likely to need to pay for care in terms of evidence as to the intention behind the investment] and her daughter had not been her nominated representative – the representatives were Mr X and Mrs Y’s granddaughter [implying, we think, that it was not likely that the daughter would have ever been the one making any funeral arrangements.]
- Mrs Y had family, separate from her daughter, who provided substantial support.
The Ombudsman’s investigator restricted him or herself to considering whether Mrs Y’s daughter’s mental health condition was properly taken into account when determining whether Mrs Y’s situation was “exceptional”.
Council records show that several managers had investigated this matter, considered Mrs X’s circumstances, had consulted guidance, and explained their decision to Mr X. This was an outcome the Council, from their investigation, was entitled to arrive at, and therefore no fault was found.
Mr X complained that the Council did not have a clear policy or explain how funeral plans were treated to a financial assessment. However, the Council expressly communicated to Mr X that its decision was based on the Care and Support Guidance and therefore no fault was found.
The LGSCO found no fault in respect of Mr X’s complaint about the Council requesting sight of the full funeral plan, including the part about the person’s personal wishes for the trustees. The Council also acknowledged that they could have made it more clear that they did not need to see that part, and said it had made efforts to ensure this would not occur again.
Mr X had complained that the Council had not communicated to an acceptable standard given it had changed its position from considering the funeral plan as deprivation of assets and then focusing it on being a notional capital asset.
The LGSCO found no fault with the Council’s communication as there was no evidence of the Council ever having treated this as a case of deprivation of assets and had always maintained that the funeral plan was a capital asset. Additionally, the general communication was efficient and sufficiently thorough.
Points to note for councils, professionals, people using services and their carers, advocacy groups and members of the public
Assets of which one has deliberately deprived oneself, constitute ONE form of notional capital, under the charging regulations, meaning that one can be regarded as still HOLDING the asset for the purposes of calculating one’s overall savings.
We think that the fact that the council referred back to the woman having been known to them since 2016 WAS in fact evidence that at some point they were thinking that she had invested in the funeral plan deliberately to avoid or reduce her charges for care later on.
We think it just got a bit lucky with the Ombudsman because its paperwork was light and had not mentioned that concept, at the time, probably through ignorance.
A pre‑paid funeral plan is not a normal kind of a trust. The investment is paid into a pooled trust fund and is indeed not “money in your estate”, but a contract that gives you specific rights.
- When you buy the plan, your money is put into a separate fund or trust run for all planholders. That fund is not your personal property and does not sit in your estate like a bank account would.
- What you own is a contractual right: the right for the provider to supply an agreed funeral, and usually the right to cancel the plan and get a refund (minus any fees) if you do so in your lifetime.
- Because you can normally cancel and get money back, councils may treat the value you could recover on cancellation as part of your capital for means‑testing, even though the underlying fund is not legally “your” money.
- When you die, if the plan is used as intended and pays for the funeral, no cash comes back and nothing from that fund goes into your estate.
- If instead the plan is cancelled after death and a refund or compensation is paid to your personal representatives, that refunded amount then becomes part of your estate at that point.
The significance is this: while funeral plans are typically structured as trusts, the market in them allows for cancellation and refunds under specific conditions. However, these plans may still be assessed as notional capital for care funding purposes, depending on the local authority’s interpretation of the Care Act, even if there is no intention to deprive oneself of one’s assets to avoid or reduce charges.
Funeral plans in the UK market are often structured as trusts, where the funds paid by customers are held in a trust to ensure they are available to cover the cost of the funeral when needed. These trusts are typically managed by independent trustees and are subject to legal and regulatory requirements, including annual valuations and compliance with the Financial Services and Markets Act 2001.
The ability to cancel and obtain a refund depends on the terms of the specific funeral plan provider. Generally:
- Within 30 days of purchase: Most providers offer a full refund if the plan is cancelled within 30 days of receiving the plan documents – a cooling-off period.
- After 30 days: If cancelled after this period, refunds are typically reduced by administrative fees.
- Instalment plans: If paying by instalments, refunds may vary. For instance, canceling after 12 payments may result in a refund of all payments minus the arrangement fee.
- Early cessation: If the trust has not had time to mature, refunds may only cover a portion of the fees paid, as the funds are invested to cover future costs.
Under the Care Act 2014, local authorities may treat pre-paid funeral plans as notional capital, simply because they can be cancelled.
They may not always take that approach, but if they believe the funds were used to reduce care charges, they are more likely to. This means the value of the plan could still be considered in financial assessments for care funding, even if the funds are held in a trust.
This is not a report that is saying that one cannot invest in a funeral plan. One still OWNS one’s own money and of course one can invest it, but one must not do so for the purposes of avoiding charges. So, if it was a £50K funeral plan, that would be suspicious, because funerals do not tend to cost that much.
But it is perfectly legitimate – especially because of one’s likely deterioration – to invest in a funeral plan, and safest to do it with a company that does not structure the investment as a revocable trust. This way, the asset will not be able to be seen as notional capital, and one can disclose one’s notes of the advice sought at the time.
The Ombudsman said that the Care and Support Guidance sets out a “comprehensive” list of what can be disregarded, which does not include a funeral plan and reasoned from there that a council therefore has discretion as to whether to include a funeral plan in a financial assessment. The Council had considered the plan as part of the assets by ‘default’.
We think that this is poorly expressed as to the structure of the charging rules: the regulations set out what MUST be disregarded, and funeral plans are not on that list; but the regulations do provide for notional capital to be taken into account, and also that assets that one has deliberately deprived oneself of constitute a different form of notional capital, as well.
In addition, the duty to promote wellbeing in all Care Act functions including charging could have been flagged up as a specific counterweight to the Council’s view that it would give people an unfair advantage to treat the investment as a disregard from means.
The bottom line is that councils do have a form of discretion, but not with specific regard to funeral plans; their judgement regarding deprivation must be evidence-based and defensible if it determines that a person has deliberately deprived themselves of an asset to avoid paying for care. The mere fact that one invests in a funeral plan does not constitute determinative proof as to that form of intention, even if it happens after a person knows that they are likely to need care and support. It can’t be assumed that every funeral plan takes effect as a revocable trust.
Councils still have to apply their powers rationally, take relevant factors into account (including the duty to promote wellbeing), avoid fettering their discretion, and follow public law principles; a rigid, unpublicised “policy” of always treating any funeral plan as notional capital, without any consideration of the individual’s circumstances or the specific terms of the plan (for example, an irrevocable trust which cannot realistically be accessed), could arguably be open to challenge.
We do not disapprove of the officers disagreeing with the Councillor’s intervention, please note. Council officers operate charging policy in the name of the Council, and there is no obligation on ASC or charging teams to explain in advance every single aspect of their thinking.
Please use the following link if you want to read the original Local Government and Social Care Ombudsman’s Hartlepool Borough Council (24 002 613) report.
If you are affected by the issues in this report, please consider asking a free, one-off question, anonymously, at a level of principle, here. Our experts’ response will give you an opinion which may then help you and the broader community, when posted.
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