If you have a parent or loved one who needs long-term care, you’ll want to ensure that they’re looked after and that their finances are safeguarded, particularly in the event of their care home closing or going bust.
The number of residential care homes that went into administration soared by around 400% in 2022 compared to the previous year, according to the Government’s Insolvency Service. Many of those affected are smaller homes which have fallen into financial difficulty due to soaring living costs, but some major providers have also gone bust in recent years. For example, Four Seasons went into administration in 2019, affecting more than 17,000 residents across 322 care homes.
Here, we look at what happens to your relative’s care and their money if their care home closes or runs into financial difficulties.
What happens if a care home closes?
In the majority of cases, the local authority will know several weeks or months in advance that a particular care home is going to close, and family members should be notified as soon as possible.
Rest assured that there are guidelines in place to ensure that residents’ care isn’t disrupted and everyone is kept informed. Even so, a care home closure can be an emotionally difficult and worrying time for a family and their loved ones who may be settled and happy where they are.
If a relative’s care is funded by the local authority, it’ll be the council’s responsibility to find new accommodation that can cater for their needs. This process should also involve attempting to place residents who have become friends in the same home.
If the new home costs more than the previous one, the additional cost may still be covered. Relatives won’t usually be expected to meet the extra cost, but in some scenarios, they may choose to pay a ‘top-up fee’. These meet the shortfall between local authority funding and your care home fees, so you may be able to remain where you are if the cost would otherwise be too expensive.
Anyone paying top-up care home fees will need to sign a contract agreeing to meet this cost. Bear in mind, too, that care home costs can increase over time, and/or circumstances may change, so it’s important to consider what happens if costs can’t be met at any stage.
If a care home resident is self-funded, their family will be in charge of finding alternative accommodation, but the council should still help you to find them a suitable home. It’s also worth requesting a care needs assessment in this scenario, as it may be that the person’s needs and financial circumstances have changed over time, and they now qualify for some help towards funding.
If you or a relative receives NHS Continuing Healthcare, meaning the NHS pays for ongoing medical support, then it’s the NHS’s responsibility to find another care home place. Read more in our guide NHS Continuing Healthcare: can you get care fees covered?
Read more in our article What happens if you run out of money to pay for care? and How to fund the cost of long-term care.
What happens if a care home goes bust?
If a care home goes bust, the usual process is similar to if a care home closes, in that another provider will usually step in to take over care of the residents, so you shouldn’t need to worry that a relative may be evicted in this scenario.
Bear in mind, too, that if a care home provider goes into administration, that doesn’t necessarily mean that any of the care homes it operates will close. Some or all of the care homes may be sold to another company. In the case of Four Seasons, for example, two of its holding companies went into administration, but the companies operating its care homes continued to operate. However, if a buyer can’t be found and the care home has to close at short notice, the local authority must make sure that everyone living there has somewhere else to go.
What happens to your money if a care home goes bust?
There are regulations in force that prevent care home residents losing their money in the event their care home goes bust.
According to the Care Quality Commission (CQC), which inspects and regulates care homes in England, care homes must keep residents’ money separate from their own. The rules are in place to ensure transparently and protect the financial interests of care home residents, with the aim to provide safe and trustworthy care services.
The UK’s Health and Social Care Act 2012 doesn’t explicitly state what happens if a care provider goes bust, but there are provisions in the act that are aimed at safeguarding the interests of care home residents in this scenario, alongside protecting their finances:
Regulations: The CQC has the authority to take action when a care provider is failing, which includes issuing warnings, suspending or cancelling a provider’s registration, or taking legal action if necessary.
Provider failure: If a care provider, such as a private healthcare company or a care home, goes bust, the concern should be to ensure that the care and services provided to patients or residents are taken care of as a priority. The NHS and local authorities are expected to have contingency plans in place to ensure care is put in place if providers face financial difficulties or insolvency. Care patients and care home residents should be moved to alternative providers or services to ensure their ongoing care and safety.
Transparency and accountability: Providers must be open and transparent about their financial status and engage with the local authority if they are facing financial problems. In Scotland it’s the Care Commission that inspects and regulates care homes, in Wales it’s the Care and Social Services Inspectorate and in Northern Ireland the Regulation and Quality Improvement Authority has responsibility for inspecting care homes.
How to protect a relative who needs long-term care
Most people go into care because they or their families are unable to provide the care they require at home.
However, moving a relative to a care home can be an emotional and difficult task, and the process may need to be done quickly if their health is deteriorating. Even if the move does have to happen in a hurry, it’s important to understand the terms and conditions of any contract that’s signed, and the rights of the person in care. Here are some of the steps you should consider taking:
Scrutinise the care home contract and legal agreement. You wouldn’t move into a rented property without checking the tenancy agreement so you shouldn’t expect your parent or relative to move into a care home without finding out what their legal rights and responsibilities are.
Ensure you have a Lasting Power of Attorney (LPA). This is a legal agreement which says that if and when someone can no longer make decisions about their finances or welfare, someone they’ve appointed will do so on their behalf. Read our guide What is a Lasting Power of Attorney and why do you need one?
It’s important to note that a Lasting Power of Attorney can only be set up while someone is able to make decisions (when they have ‘mental capacity’). That means you can’t leave it until someone has moderate dementia, for example, as they may not understand the implications of what they’re being asked to sign.
Find out what state benefits or allowances your relative is entitled to. You should know – or find out – how much money they may be entitled to, when it is paid and where the payments go to. Read more in our guide Benefits if you have a health issue or disability. You can read more about the impact of benefits if you go into a care home on the Gov.uk website.
If the local authority pays towards your relative’s care then their State Pension and benefits are taken into account when considering how much they will receive towards the cost. The only money they’re guaranteed to be left with is a ‘personal expenses’ allowance which is at least £28.25 a week.
Make a formal complaint if things go wrong. If a relative is moved to another care home when their home closes or goes bust, and you believe it isn’t right for them and/or cannot provide the necessary care, you can complain to the regulator (Care Quality Commission). It’s their responsibility to look into this on your behalf, including whether you feel you haven’t been properly kept informed, or if decisions have been made about the future care of your loved one which will adversely affect them.