Meeting the rising costs of Long Term Care
Derby District & Law Society (D& DLS) magazine – August 2010
Meeting the rising costs of Long Term Care
Individuals (or their Attorneys) paying for care are usually concerned whether their capital is going to be eroded. If you are acting as a Power Of Attorney or have been appointed by the Court as a Deputy, the following article is vital reading.
Who pays for the care?
When entering care, the Local Authority must first assess your needs and agree that these meet its criteria for care in a Residential or Nursing Home. If you are moved from hospital to a Nursing Home because of a shortage of beds, but still require attention by a Registered Nurse then you could qualify for ‘Continuing Care’, under which the Local Authority meets the full cost of your Nursing Home fees.
If you do not qualify for Continuing Care and your assets (savings, investments and property – this could include your home) exceed £23,000, you have to meet the full cost of your care, although the NHS meet the cost of any care provided by a Registered Nurse (up to a maximum of £103.80 per week). Further financial assistance should also be available in the form of the Attendance Allowance, which is neither means-tested nor taxable (between £47.80 and £71.40 per week, for over 65’s).
It is important to note that if the Local Authority considers you to have deprived yourself of capital or assets in order to reduce the amount you pay towards care fees, they have far reaching powers to recover money they consider you owe – without any time limit!
How will you meet the cost of your care?
In some cases it is possible to restructure your savings so that these can generate enough income to supplement your existing Pension and Attendance Allowance income to meet the shortfall in funding your care fees. The success of this planning depends largely on the level of capital you have and the size of the shortfall in your income.
Unfortunately, for many people, the level of capital they have would not be sufficient to generate enough income to meet the shortfall. This typically forces them to sell assets to meet the shortfall, which in turn leaves less capital to generate income, which in turn increases the shortfall that needs to be met. Once in this situation, an individual’s capital can be eroded very quickly.
An alternative to investing capital to generate income is to buy an Immediate Needs Long-Term Care Annuity. The aim of this would be to exchange a lump sum of money in return for a guaranteed income for life. This can mean that you are able to afford the care that you want for the rest of your life, as well as protecting the remainder of the value of your estate, if you survive for a long period of time.
The level of these payments would usually increase each year to provide some protection against the effects of inflation and rising care fees and can include some capital protection should you die prematurely. Payments made directly to a Registered Care Provider are not taxed under current legislation.
Who should be involved in the planning to meet my care costs?
Funding care fees is an emotive subject as assets are potentially eroded to meet the costs. Therefore, you should ideally discuss your plans with those people who may be affected by your decisions.
If you are acting as a Power Of Attorney or have been appointed by the Court as a Deputy, you need to show that you have considered the above planning, to avoid a client’s estate being eroded and them being unable to fund the type of care they want or to leave an inheritance for their loved ones.
Sometimes a delay of just one year in costing out this type of plan can make the difference between an Immediate Long-Term Care Annuity being a viable option and not being affordable, so do not delay!
A sensible overall plan
Professional Financial Centre (East Midlands) Ltd has successfully helped many clients to put a sensible financial plan into place that will last them for the rest of their lives. When looking at the huge choice of investments available we are able to prove that we only have your interests at heart. We do not have any vested interest in choosing one particular product or course of action over another. As changes happen, we review our clients’ plans, adjusting them to meet changing economic circumstances and family needs. If you want to challenge us to do the same for you or your clients, you will not be disappointed. If you simply want a second opinion, our view on your existing holdings, or have a general query about financial matters, please call us.
Professional Financial Centre (East Midlands) Ltd is a local financial services resource for Legal and Accountancy firms who do not operate in house Financial Services departments. We share the same ethos as Professional firms, in that we act purely in our clients’ interests, operating solely on a fee basis and accounting to our clients for any commissions. As a result of our qualifications, experience and culture, we qualify to be included on the SIFA Professional Directory of IFA’s, which is endorsed by the Law Society. The database can be seen at www.sifa-directory.info.