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I covered long term care needs last week and figured I would focus on payment methods for care and how much of your capital is included or ignored if care costs are unavoidable.
I am always amazed at how, after years of extraordinary progress in technology and efficiency, after years of paying into national insurance, benefits seem to be declining.
Everything seems to cost these days. I used to park for free everywhere, now it’s a fortune.
Despite this, the costs of care can be painful, and if our dignity in our dying days isn’t the most important thing to consider, what is it?
The costs are attractive and not exact. The average cost of a place in a locally funded care home was around £ 35,000 in 2019/20.
The market and competition authority estimates that the costs for those who pay their own fees are 41% higher than that. Around 10 percent of people were expected to pay more than £ 100,000 in fees, although that number is likely higher now.
There are very detailed studies on life expectancy inside and outside nursing homes, the most recent excluding “covid times” showing that in the third year, 21.4% of residents of community dwellings had died compared to 56.9% of nursing home residents. residence. Take what you want, but the death rate has been increasing over the years.
Anyway, if we add the percentage of people transferred out of care to the death rate, it stands at 73.9% in 2015. I’m sure that number is significantly higher now.
This is important to establish how you can analyze how you could finance the costs of care.
If you contribute to an immediate care pension without any guarantee of payment period after death, would it be better than simply financing the care from your capital as you go?
Seems more than unfair, after paying your way through the system you now have to pay again and waste all your savings, so let’s see if all of your money is included in the assessment of your care?
Some properties are ignored. For example, an investment obligation with an element of life insurance is not taken into account. This is not the case with all investment bonds, as those constituted on a capital buyback basis have no element of life cover (your independent financial advisor will guide you on this) and are not ignored.
Also ignored are the family home during the first 12 weeks of care, life insurance policies, any personal injury settlements in trust or held by the protection court, and any capital in an interest in possession or in discretionary trust that you are a beneficiary.
If you have accommodation and your partner, spouse, former partner or civil partner still lives there (except in the event of separation), your accommodation will also be ignored.
This is also true if a parent aged 60 or over, a child under 18, or an incapable family member lives in the household.
Of course, you can see how important it is to follow these tips before needing care.
One of the main reasons for this is the rule on the deliberate deprivation of capital. If you are transferring assets and the local authority can dispute the motivation, that could be a problem.
It all has to do with motivation. Why did you transfer the money to an investment bond for example? If the authorities believed that you thought there were future care costs, and then moved the capital, that would likely be rejected and the capital included in your valuation.
This is also true of the capital investment in a family trust, and naturally, if the motivation was to reduce and protect the estate from custodial expenses, it would almost certainly be defeated.
And so, early planning is essential to see how you might manage estate tax planning and reorganize your estate now for the purposes of income and capital growth, because while your motivation later may be correct, if it is. too close to the assumption of responsibility, it can be difficult to prove its validity.
Peter McGahan is Managing Director of independent financial advisor Worldwide Financial Planning, which is authorized and regulated by the Financial Conduct Authority. If you have a financial question, call Darren McKeever on 028 6863 2692, email [email protected] or visit www.wwfp.net
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