Long Term Care fees – a high price to pay for your parents living longer?

Aside from the emotional impact of putting an elderly relative into care, finding the funds to cover the high fees can be horrendous for some families. Here’s our top tips…

Having worked hard for many years, most of us have a certain image of retirement. Whether it’s spending more time doing a particular activity, being with family and friends, or travelling abroad; we all want to enjoy the fruits of our labour.

Whilst this is the view of retirement that we all hold onto, unfortunately, statistics show that more than half of us will require some form of long term care by the time we reach the age of 65. For those that have parents or in laws quickly approaching this age, the very thought of putting them into long term care is awful.

On top of this, it’s daunting to think that the vast majority of their assets may end up being spent on long term care. That’s if, there’s even enough to cover the cost fees overtime considering that people are now living longer than ever.

How much does long term care cost? 

The cost of long term care in the UK is becoming increasingly expensive. A report issued in 2017 by LaingBuisson, revealed that the national average cost of residential care in a home is £600 per week (more than £31,200 a year). If your parent needs to be in a home that provides nursing care, this weekly figure quickly shoots up to an average of around £1,000 per week.

So, for anyone facing the prospect of putting an elderly relative into care, here’s Innes Reid Investments Top 10 tips for reducing the financial strain:

1.Start planning early!

In short, the sooner you start preparing the better. Due to Data Protection Regulations, it’s much easier to gather essential information about your parents medical history and finances now with their help. The more information you have the better your chances of securing the highest possible pay outs from annuties. You should take note of any accidents, illnesses, hospital referrals and prescriptions as well as details about their savings, income and investments.

2.Consider the cons of state funding

State help may be available to cover the cost of long term care but this depends on your parents’ income and if their assets exceed the specified threshold in their area. The threshold for needing to self-fund care is £23,250 in England and NI, £25,250 in Scotland and £30,000 in Wales.

However, finding a way for your parent to fund their own care is probably something you will want to achieve. Doing so will mean you have more control to choose the ‘best’ care home for your parent and will not be restricted by the cap put on state funding.

3.Will you need to sell your family home?

Not necessarily! Having to sell the family home is probably the biggest fear for most people looking to fund long term care. However, if your parents’ spouse,civil partner or a dependant still lives there, their home (or share of it) won’t be counted in their assets. If this is the case, your local council cannot suggest that it is sold to repay the fees covered by them.

If the parent going into long term care does not have a spouse,civil partner or dependant living with them then they may still be able to keep their home by opting for a deferred payment agreement (See Tip 6 for more information).

4.Put a financial power of attorney in place

Without a lasting power of attorney, you will not be able to access your parents’ savings or rent their home etc. So, it’s essential to put this in place as soon as possible. If your parent loses mental capacity before one is created, you will need to be appointed as a deputy for your parent by applying to the Court of Protection.

Innes Reid Investments Ltd. has excellent working relationships with a range of local solicitors who can advice on and set up a financial power of attorney. Please contact us to find out more.

5. Be aware of ‘get out’ clauses

We’ve already covered the fact that your parent will be able to avoid having to self-fund long term care if their assets do not exceed the threshold in their area (See Tip 2). They will also be able to exclude their property from their assets if their spouse,civil partner or a dependant still lives there (See Tip 3).

However, there are a couple of other ‘get out’ clauses when it comes to self-funding long term care that not everyone is aware of. If they need residential care purely for medical reasons, they should quality for NHS Continuing Healthcare. Your parents’ eligibility for NHS Continuing Healthcare depends on their needs and not a diagnosed condition. Their needs will need to be assessed by a team of healthcare professionals.

Another clause is if they’re selling their home but their care would otherwise have been government funded, then the first 12 weeks of care are free.

6.Look into a deferred payment agreement

Opting for a deferred payment scheme is another alternative to selling your family home in order to finance care. Local Authorities are obliged to offer deferred payment agreements, meaning a charge would be put on your parents’ home and the bills would be paid out until it is sold.

Of course there will be fees and interest involved, but you could consider renting out the property to provide an additional income and benefit from an increase in property value during the additional years of ownership. The rent, coupled with pension payments, could cover all or a substantial proportion of the monthly care costs. 

7.Find out if your parent is entitled to any benefits

In England, there are 2 main benefits worth thousands of pounds a year that your parent may be entitled to if they’re over 65 and assessed as needing personal care and/or nursing care. They are not means tested or taxed and are of course a big help to anyone self-funding care.

Your parent may be entitled to one or both of the following:

• Attendance Allowance (AA) – £83.10 a week in 2018 and paid at the full rate regardless of savings or income to over 65 years old who need help with normal daily activities.
• Personal Care Contribution (PCC) –  £155.05 in England (£148.01 in Wales and £78 in Scotland) for those that these nursing care.

You can find out more about these benefits on the gov.uk website.

8.Consider all financing options

Hopefully, your parent will have a mixture of cash and other assets alongside their pension to help fund the cost of long term care. With access to your parents financial information and costs of suitable care homes, you can calculate whether their resources meet the costs and the extent of the shortfall, if any. You should consider the pros and cons of selling your family home, renting, the stock market route and equity release.

9.Shop around for annuity 

The downside of using your parents’ pensions and investments to fund their care is that these savings aren’t infinite. If you’re concerned about running out of cash in the future, then a great alternative to this is opting for a Care Annuity.

These income plans can be purchased at the point of needing care and would provide a top up to help pay the fees for the rest of your parents’ life. An immediate needs annuity will pay out a fixed or rising sum every month until the death of the annuitant in return for a lump sum.

An immediate needs annuity can provide a regular income now to pay for care at home or in a care home. The income from this type of annuity is tax free if it is paid directly to the care provider.

It is very important to shop around for annuity. The estimated difference between the best and worst annuity rates could see you throwing away £30,000, if you had a £100,000 to buy an annuity with.

It’s also important to consider that if death occurs early on, the often substantial upfront payment required to set up an annuity will be lost.

10.Don’t worry! Consult a Financial Adviser

If you’re concerned about covering the costs of long term care, either for an elderly relative or yourself, then you should speak to an Independent Financial Adviser about it as soon as possible.

Innes Reid Investments Ltd. specialises retirement and financial planning. To arrange a no obligation consultation at our expense, call us now on 01244 347 583 or email us at: info@innesreid.co.uk.