Long Term Care – Changes that could affect your financial planning

The care of our elderly folk and the cost of this care provision has long been a topical subject in financial planning. As a specialist subject, financial advisers have to be qualified to provide advice in this ever changing area of advice.

In July 2013, a Government consultation paper was launched to consider reform of the method and timing of paying for an individual’s care costs relating to either residential care or care provided in their own home. The idea was to bring reassurance to millions of people who could be caught in this situation, by ending what many would argue was an unfair system of facing unlimited care costs or selling their own home to pay for these costs. This caused much distress.

Means Tested Again?

The fine print in the Government’s plans show that people with relatively modest assets (excluding their family home), of below £23,250, will only be eligible for the deferred payment plan to pay for their care costs. Therefore, a large number of people will not now be eligible for this scheme and will have to pay towards their own costs while their assets are above this level.

Government Backtracking?

This is seen by many as the Government breaking a pledge they made after the well-received Dilnot commission report on the funding of Long Term Care was published. The Government pledged to introduce (in 2016) a cap of £72,000 as the maximum amount an individual would have to pay in their lifetime towards their care costs, along with new rules on eligibility on state support. The scheme also promised that if anyone was facing the prospect of having to sell their home to pay for care costs they could ask the local authority to provide a long term loan which would eventually be paid out of the individual’s estate (i.e. deferred payment plan).

Deliberate Asset Deprivation

Many people are faced with having to pay for their own care during their own lifetime, while their assets (excluding their main home) are valued above £23,250. People often believe that they will simply be able to reduce their assets (for example, by gifting or transferring them to others or placing them in trust), such that their total assets are below the £23,250 limit and they will be able to benefit from the Government schemes. However, if the individual Deliberately Deprived themselves by disposing of assets for this reason, or the Local Authority believes that this is the reason, then the Local Authority has the power to recover costs which they have paid towards the individual’s costs.

 
Summary

Whenever a government indicates that they are going to implement new reforms then the devil is always in the detail. At Chapters Financial, we also maintain a view that it is important not to take action on suggested legislative change until it has occurred and is in force. It is all very well to listen to the speeches and rhetoric, however it is the actual legislation which matters. If an individual or family is facing the prospect of paying for long term care costs or they want to ensure that this provision is planned for in the future then we believe they should seek professional independent financial advice.

Figures provided in the content of this blog are for tax year 2013/2014 and are subject to change in the future. No individual advice is provided in the content of this Blog.

The team at Chapters Financial can help you with your financial planning including long term care planning and look forward to working with you.

Simon Hewitt BSc (Hons) DipPFS
Financial Planner
Chapters Financial Limited

 

Chapters Financial Limited is Authorised and regulated by the Financial Conduct Authority, number 402899.