The best time to think about long term care is before you need it
It’s best to talk about long-term care early, before the need for medical or personal care is imminent. Amy Clatworthy and Spencer Gardner outline what you need to know when choosing and financing long term care options for you and your family.
The green paper on social care setting out the government’s proposals for long-term care funding was announced by then chancellor Philip Hammond in the 2017 March Budget and was planned for the following autumn. Other matters, however, have taken up the government’s time since then; following a number of missed deadlines, we are still waiting for its publication. In the meantime, funding the costs of care is still very much on the individual.
The reality is that, if you or your family want to have the choice to decide the level of care you want, and where you want it, you will have to pay for it all yourself. If you do opt for the local authority to provide your care, you will still pay for it, at least until your assets are depleted to your last £23,250.
How likely am I to need or have long-term care?
One in five people over the age of 70 now receive care in the home and there are over 410,000 people currently living in residential care. Of those in residential care, 170,000 are fully self-funding, and a further 47,000 (11%) are local authority funded with a private third party topup. The remaining 193,000 are either fully local authority funded or NHS funded. With the older population expected to increase by more than 40 per cent over the next 50 years, the trend is only heading one way.
How long is the average stay in a care home?
A BUPA study of all its care home residents found that the average stay is 2.2 years. However, a quarter of residents are still in care after three years. The costs of care vary wildly depending on location. The estimated cost of care in the South East is £747 a week, outstripping London, where the average weekly fee is £736.
Previous government proposals to reform the system with a lifetime cap on state funded care of £72,000 have been deferred so many times now, that it seems unlikely they will ever be implemented.
There are restrictions in place on what income and capital can be used to fund local authority care. For example, your home is disregarded as an asset if your partner or qualifying relative (such as a relative who is aged 60 or over or is incapacitated) continues to reside there. Investment Bonds are generally excluded and therefore can form a useful part of any investment portfolio. If you are married, half your non-state pension income is also excluded. If you are an antiques collector or art lover, these items are classified as personal possessions, so are excluded.
If you accept that at some stage you will be required to fund your own care or the care of a loved one, some thought should be given to financial and estate planning to ensure that care costs can be met. It may be useful for you to see an Independent Financial Advisor (IFA). They can advise on how best to hold or invest capital, to either maximise income or to invest it, so that it may be disregarded as available capital. It is important to remember that whatever you do will be subject to the deprivation of assets rules.
Whilst you are fit and able, it is also vital that you put measures in place that will ensure you will receive the best care possible and loved ones will not have a more difficult time than they may otherwise have.
Lasting Powers of Attorney can be prepared to deal with your personal financial affairs and also your health and welfare. It is important that your chosen attorneys can not only deal with arrangements to pay for your care, but also be able to make decisions regarding your care, once you are no longer able to make those decisions for yourself.
As difficult as they may be to initiate, it’s so important to have conversations with your family and friends to let them know your wishes.
For example, you may have a preferred care home or want to check that your attorneys know enough about your financial arrangements so they know where your assets are and can implementan action plan with minimal delay and stress.
Estate planning and care fee mitigation
You may also want to consider ways in which you can mitigate the loss to your estate when you require care. As outlined already, you will fully fund your own care until your assets are depleted to your last £23,250, subject to certain exclusions. Many in this ituation don’t want to see their life’s savings wiped out, or their family home sold, specially if they intend these assets to be safeguarded for future generations. Creating a Lifetime Trust can offer a level of protection against care fees, as the asset will no longer be owned by the party requiring care, but will instead be held on trust for the benefit of others. Alternatively, you may consider simply transferring assets directly to your loved ones now.
Expert advice is required when embarking on estate planning and care fee mitigation in this way – if the local authority can prove that you have deliberately given away assets to avoid paying for care, the person who received the gift is liable to be charged for the care costs, and if there are no assets elsewhere, the person receiving the care will still receive the bill. You will also be relinquishing control of an asset. For example, if you transfer your home to your children, they will be the legal owners of the property and will be able to sell this without your consent or approval.
Couples may also want to consider putting in place Will trusts to protect either their whole estate or just the family home. On death, your assets will pass into a life interest trust whereby your surviving spouse will be entitled to live in your property or receive income from your investments and bank accounts for their lifetime, but the capital entitlement will belong to your named beneficiaries, such as your children for example. If your surviving spouse were to then need care, your assets have not passed directly to them and cannot be considered in any financial assessment, safeguarding them from being used towards care. Bearing the responsibility for securing long-term care for a parent or loved one (especially if they are declining physically or mentally), and being the surviving partner who needs to come to terms with the situation, can be about emotionally difficult as it gets. Thinking about these issues early and planning ahead where possible can help ease that burden.