Money Matters: Paying for long term care

Due to our ageing population, it is common place to find clients of a certain age in the position where they can no longer manage in their own home. This can cause difficulties from both an emotional and financial perspective.

Most clients are unaware of the options available to them and very few take any legal or financial advice around the options that they have available to consider.

The cost of residential care or continuing care in the family home is expensive and is a cost that most people are unable to meet without the encashment of investments or the sale of the family home. This can be a difficult and emotional time, with those that are facing the prospect of care being very concerned that their assets are going to be eroded down to the bare minimum of £23,250 before any Local Authority assistance is available to them at all.

This however can be avoided with the appropriate financial planning advice being sought. This may involve the purchase of a care plan, thereby guaranteeing a level of income throughout the care recipient’s life. This will help ensure that remaining assets are ringfenced for future beneficiaries and give the care recipient and the family peace of mind that care costs can be met indefinitely without the ongoing erosion of assets. Equally it could mean that by reviewing an investment portfolio, a suitable level of income can be generated to meet the shortfall required.

Each individual’s requirements will be different and that is why financial planning at this key stage of someone’s life is absolutely vital.

A person will be means tested and the home can be disregarded if it is occupied by a partner, a relative who is over 60 or incapacitated, a child under 16 who you are liable to maintain or a lone parent who is the estranged or divorced partner of the client.

If the house is to be taken into account then it must be considered whether the house should be sold to use the capital and income from it to fund care. Some may feel that this is not a good time to sell, so an alternative might be to organise a letting of the property to tenants, using the income towards care home fees or by entering into a deferred payment agreement with the Local Authority. Not all local authorities are prepared to offer this arrangement but, it can effectively mean that the Local Authority will pay the fees and place a charge on the house. This will not become repayable until after the person has died or until sale. The loan will be interest free until 56 days after death when interest becomes due at the rent set by the Local Authority. This can be difficult if the care home costs are higher than the Local Authority are prepared to pay.

It can be tempting to think of giving away cash or your house, perhaps to family members, so that you will not have assets in your name to fund care home fees. There are disadvantages to doing this and also there is a regulation which says that, if a Local Authority believes that a person has deprived him or herself of assets deliberately to avoid paying care home fees, the Local Authority can deem that the person still owns that asset and assess the financial situation accordingly. Thus, the person would not own the asset or cash because they had given it away and yet still be deemed for care home purposes to have that asset in their possession.

These are some of the options available to you. It is vital to take proper legal and financial advice to enable you to weigh up the options and take suitable decisions.

For further information please contact Elliot Lewis.

The content of this article is intended to provide a general guide to the subject matter. Please contact us for advice about your specific circumstances.