Long-term Care
Choosing the right care is probably something few of us have much experience of and can feel overwhelming. The care system can be complicated and difficult to find your way through and research suggests the majority of people receive insufficient advice about how care fees can be funded.
No one given a choice would opt to spend all the assets built up over a lifetime on care fees. With more of us needing long-term care as a result of living longer, serious consideration must be given now to how you will fund these fees without eroding your family’s legacy.
Unlike health care, social care is rarely free. Most people who opt for residential care will have to pay some or all of the costs themselves. Council funding may be available, but this is means-tested. In England, if you have savings worth more than £23,250 or you own your own property, you will usually not be entitled to help with the cost of a care home. And to qualify for fully funded care, your savings or assets would need to be worth less than £14,250.
The most common approach for funding any ‘shortfall’ between existing income and care costs tends to be to simply draw down what is needed each month from savings, and perhaps property sale proceeds, and hope that these do not run out completely.
Running out of money means relying on the local authority to fund your care, and there are no guarantees the local authority will wish to maintain the same payment levels. Unless your family is able to make up the difference, compromises may have to be made. In addition, of course, using up all the money to pay for care means there is no legacy to leave to loved ones.
However, with financial planning it may be possible to fund care for as long as required, whilst safeguarding as much capital as possible.
There are specialist insurance plans called an immediate needs annuity these are specialist insurance plans designed to convert capital into income to help meet care fees. In return for a one-off lump sum you receive a guaranteed tax-free income for life, provided that it is paid directly to the care provider.
If you are making decisions under a Power of Attorney as it is your duty to act in the other person’s best interests any decision should only be made once you are in possession of all the facts.
Julie specialises in advising on care home funding for self-funders, she has achieved the Later Life Adviser Accreditation demonstrating she has a good understanding of the specific needs of older clients, and good interpersonal skills.
Jennifer’s Story
When Jennifer Smith’s mother, aged 87, broke her hip and could no longer manage on her own, she knew the family would have to consider permanent care. Finding the right place was hard enough but then they were hit by the cost.
Those with assets of more than £23,250 have to pay for their own care.
Because Jennifer’s mother lived alone and she had only a modest income and savings but owned her property, the £150,000 of assets which that equity represented put her above the level at which she could ask for Local Authority support.
Funding therefore fell entirely to her. She explored two options that were available to her:
Option A
She could sell her home.
That would unlock £150k which could be used to pay her care fees.
Potentially, Jennifer’s mother could find herself in a situation where she uses up the £150k and would still need to find a way to pay her care fees. This could also have an impact on any inheritance/legacy left.
Option B
After speaking to Julie a qualified care adviser who would assess her financial situation.
Julie recommend an Immediate Care Plan which is guaranteed to pay a known amount towards Jennifer’s mother’s care fees for the rest of her life.
This could be used in conjunction with an investment strategy to both safeguard her care and provide an inheritance/legacy.
Jennifer and her mother can rest knowing that a regular income to help cover care fees will be paid for the rest of Jennifer’s mother’s life – regardless of how long that may be.
In England and Northern Ireland, for tax year 2020/21.