£1,000 a week? How much is the cost of Long Term Care?

The number of Long Term Care enquiries has been climbing significantly over the last few years. We are all living longer and the strains/demands of modern day life certainly seem to be taking its toll on the quality of life that many have in their later years. 

Many enquiries we receive come from those who have received Power of Attorney (or Court of Protection Appointed Deputy) to care for someone’s affairs, either financial or health related, at a time of need. There are two types of Lasting Power of Attorney, namely: 

•         Property and financial affairs

•         Health and welfare

A good example of when advice is needed is when someone enters a care home because they are struggling to look after themselves through failing health. Of course there are other reasons to enter a care home, such as the social aspects of maintaining regular contact in a community. It is at this time that the issue of money and meeting the cost of care becomes very important. 

Attendance Allowance?

The greatest concern (and responsibility) is obviously to meet the costs of any care provided to the person in your care to ensure they are comfortable. You may get some assistance towards costs, such as the Attendance Allowance. There are two levels of tax-free Attendance Allowance (Higher rate currently £77.45 p.w and Lower Rate, currently £51.85 p.w /tax year 2012/2013) and these are detailed further here: http://www.direct.gov.uk/en/MoneyTaxAndBenefits/BenefitsTaxCreditsAndOtherSupport/Disabledpeople/DG_10018710

Financial Assistance?

If the total assets available (including the value of the home) fall below £23,250 (tax year 2012/2013), your local authority may help with care costs, however the cover they provide may not be to the standard or in the location you would prefer. More details can be found here: http://www.moneyadviceservice.org.uk/yourmoney/life_work_and_study/guides/caring_for_someone.aspx

What can it cost?

In my recent experience, many are paying around £1,000 per week for their long term care requirements. It is this somewhat daunting requirement which places much pressure on those appointed as Attorneys to balance the budget in ensuring that any capital available, such as that released from a house sale, is planned carefully to ensure that care is provided both now and into the future. With inflation expected to remain higher than anticipated (see Bank of England May 2012 statement http://www.bankofengland.co.uk/publications/Pages/inflationreport/ir1202.aspx) ,it is also important to build increases in care costs into the financial planning undertaken. 

Variations and the quality of a care facility

I am aware that care cost can vary significantly dependent on where in the UK the care is provided, and you might want to investigate this carefully. Others prefer alternative solutions, such as remaining in their own home, with care being provided there. Whilst assessing the facilities available in your area, you can also look on a provider’s website to see the details of their last Care Quality Commission assessment and its outcome. More details of the work of the Care Quality Commission can be found here: http://www.cqc.org.uk/

Existing Income

Existing income will need to be taken into account, such as that received from (as examples) State pension, private/occupational pension arrangements or investment income. The income tax charge made on this income will also need to be calculated to identify the net income available for care.

The nil rate income tax band increases with age (subject to limits) and again this needs to be taken into account when planning for the provision of care fees.

Providing additional income from capital

One possibly simple way of achieving protection for someone who has recently entered care without any pre-existing protection, is to use an annuity to purchase income. This option has its security, but many find that the initial capital cost can be concerning. Each situation is different and the health of the Attorneys charge may well have a bearing on this decision. Another alternative is to generate additional investment income to help towards costs. This is likely to be subject to the Attorney’s views on investment risk. There are many combinations of plans that can be used to create a suitable solution and the main key is to take independent financial advice as soon as possible to create a plan that can be implemented in a timely fashion to get care costs in check. 

The Standard Financial Planning Rules apply

Emergency Deposit Funds

As with most types of financial planning (and planning for the provision of long term care costs is no different) I would recommend that you maintain an emergency deposit fund for the person in care. This should be a readily accessible cash/deposit type fund to meet any unforeseen costs that may occur. You can still use ISA allowances to enjoy tax efficient returns on cash funds, as an example. 

Will

Make sure there is a Will in place and that it is held securely for future reference.

Record Keeping

I would recommend that records of costs, expenses and income are maintained and that any advice received is maintained and reviewed to ensure that the responsibilities of the Attorney are being met.

Summary

Many new Attorneys and Deputies find the prospect of financial planning to meet care costs a daunting task, usually because of the capital involved and the high income that this needs to be generated to meet on-going care costs. Good quality advice is important in this instance, to ensure that income, and any shortfalls, can be understood and balanced and that this advice should be reviewed regularly. Chapters Financial can help you with this financial planning.

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No individual financial planning advice has been provided in the content of this blog. You should speak to your own independent financial adviser (IFA) or please contact Chapters Financial Limited on 01483 578800.

Keith G Churchouse FPFS

Director

ISO22222 Certified Financial Planner

Chapters Financial Limited, Guildford, Surrey

Chapters Financial Limited is authorised and regulated by the Financial Services Authority.