Long Term Care
Planning for the financial impact of funding long term care is something that is too easy to ignore. But once you, or a loved one, are in need of ongoing care, it is more important than ever to ensure there is a sound financial plan in place.
Anyone with a care need is entitled to a free care assessment by their local authority, irrespective of their means. This assessment will help to identify the level of care that is required and is the starting point in developing any care plan.
Once care needs are established, there are a number of options that can be considered, including care at home, residential care and residential care with nursing, with the costs of funding varying dramatically depending on location and the type of care required.
Local authority support
The starting point in developing a financial plan for long term care is to identify and obtain unclaimed state or local authority benefits to help support the cost of care.
The care assessment will help to identify the level of support available. Local authority support, however, can be limited, and while some financial support is not means tested, meaning it is available to anyone irrespective of means if they have a care need, much of the support offered by the state and local authority will be means tested. This will mean that for most people entering care for the first time, there will be some level of self-funding required.
Self funding options
Where there is a gap between what the state and local authority will provide, and the actual cost of care, it is important to work out how this shortfall can be met. Anyone with total assets, including their home, of above £23,250 (in England, with regional variations) is expected to meet at least part of their own care costs.
Options will include:
- Funding from income: there may be sufficient income from pensions, savings, investment or rental income to cover the shortfall in funding required, or existing savings, investments or property could be structured in such a way to help towards this.
- Funding from savings and investments: if the income from savings and investments is not sufficient, and depending on the amounts involved, it might be possible to draw on existing savings and investments and use these towards the ongoing cost of care, although it is important to understand the risk of running out of money, and the impact this may have on the ability to stay in the care home of choice for the long term
- Family support: family members could be willing to step in and support the ongoing cost of care
- Sale of home: options will depend on whether anyone else lives in the home, how the home is owned and how the individual requiring care, or their attorney, wishes to treat the home. One option for those with assets of less than £23,250 (excluding the home) can be to reach a ‘deferred payment agreement’ with the local authority, whereby the local authority may agree to help with the cost of care and will recoup these costs, plus interest, when the property is eventually sold.
- Equity release: an equity release plan is another way that property can be used to fund care, for example if care at home is the preferred option, or if someone else is still resident at the property.
- Property rental: depending on the type of property, it may be able to be rented to provide an ongoing income which can contribute towards the costs of care
- Immediate care plan: this is a type of product that can be purchased with existing assets, and provides a guaranteed level of income which can bridge the gap between current income and the cost of ongoing care. Under existing rules, if this income is paid directly to the care home it is tax free.
Long term planning
Once care needs have been established, and the source of funding including local authority support and self-funding has been identified, it is possible to make longer term plans with any remaining savings and investments. This can help ensure, for example, that the cost of care can continue to be covered even as it rises in the future, and that remaining savings and investments can be protected for future generations.
The ‘care cap’
The much talked about ‘care cap’ aims to put a maximum on the amount that will be spent on care costs by those requiring care. The introduction of this cap on costs has been pushed back to April 2020, meaning that only the costs of care from that date will count towards the proposed cap of £72,000.
In addition, it is important to understand that this cap only includes the cost of care itself, and even then only up to a local authority agreed weekly amount and does not, for example, cover residential costs associated with a stay in a care home. Therefore, the total amount that will have been spent by the time the care cap is reached, is expected to be significantly more than the £72,000 proposed.
For these reasons, the care cap is not expected to have an impact on the majority of those needing care.
Developing the right approach
If you’re worried about the possible longer term financial impact of care costs on you or your family, whether there is an immediate care need or whether you are concerned about future costs of care, we can help make sure you are claiming the support available from the local authority, and ensure a full financial plan is in place to best meet the costs of care from income and other sources, and in harmony with other financial planning needs.