Paying for long-term care: are you prepared?

Most people have to pay some or all of the cost of their long-term care and their family home is likely to be the largest asset on which they will need to draw to meet care costs – unless they make other arrangements.

I f you have assets of more than £23,250 if you live in England, Scotland or Northern Ireland, or more than £23,750 if you live in Wales (figures 2017/18) you will have to pay the full cost of your care yourself. The value of your savings, investments and property, including your home unless you normally share your home with your spouse or a relative over the age of 60, all count towards your assets. If your assets are less than the above figure your local authority may pay for part or all of your care.

According to Saga, the average stay in a care home is two and a half years and the average weekly cost £537, giving a total of £69,810. In many areas the weekly cost is a lot higher – and of course the person may need care for longer.

The good news is that there are a number of ways that you may be able to fund the cost of care without totally depleting the family finances.

Paying for long-term care: care fees plan

Many people going into long-term care buy a care fees plan. You pay a one-off lump sum to the plan provider, who then pays a regular, tax-free amount directly to the care home for the rest of your life. The amount usually increases over the years, to keep pace with increases in care fees. This removes the worry of running out of money and relying on your local authority to pay for care, which may involve moving to a home not of your choosing.

This method has the additional benefit that the amount paid for the plan immediately falls outside your estate for inheritance tax purposes, yet you will receive the benefit of the tax-free payments for the rest of your life.

The cost of a care fees plan depends on your age, health and how much the care home charges. No medical assessment is required, just some information from your doctor and the care home.

Generating more income from your savings

It may be possible to generate more income from your savings and investments. Our professional financial advisers will check any savings and investments you have and see whether they could generate the extra income you need, without taking too much risk.

Renting out your home or a property

Many people are worried that they will have to sell their home and use the money to pay for their care. Depending on your circumstances and the wishes of you and your family, you could consider renting out your home when you move in to care. The rental income you receive could then go towards paying the fees. However, your home may need to be renovated before it can be rented, someone would have to manage and maintain the property, and you may have to pay income tax on the rental income. We can help you decide whether renting out your home is a feasible way of paying for your long-term care.

How we can help

Care costs a lot, so we make sure that you are receiving all the state benefits and any local authority funding to which you are entitled. We recommend ways of reducing the risk of running out of money and of protecting your remaining capital.

We review your savings and investments to see whether you can generate additional income. We also explain who pays for the care if your spouse or dependants are still living in the family home. We talk through our recommendations with you and leave you a detailed written report explaining them in clear English.

This is a decision which many people find daunting and it is important to understand all the consequences. We encourage you to think carefully about our advice and we happily answer any questions you may have. If you decide to go ahead we will make the financial arrangements for you, providing you with the paperwork to sign, and check that everything is in place as agreed.