Funding long-term care – without selling your home

I was informed recently that an elderly client, a lovely lady, had passed away. Her family, however, had had the peace of mind of knowing they had done all they could to make sure she was well cared for in her final years.

Eight years ago she had moved into a residential care home, where she was comfortable, content and in the hands of qualified staff.

Care and nursing homes can be extremely expensive: in the region of £3,250 per month (£39,000 a year) currently

This lady’s family were able to make provision to pay her fees after consulting me – without having to sell her home to fund the costs, even though she did not have much in the way of savings.

The strategy I put in place was as follows:

  1. After taking into account all her pension incomes and allowances, she was £1,000 per month short of funding her care fees.
  2. The best Long-Term Care Plan available on the market would cost £72,000 and pay her fees as long as she lived.
  3. Her two-bedroom home was worth £250,000 and I arranged for her grandson to buy a share of it by raising a mortgage that was used to purchase the care plan.
  4. The property was rented out for £850 per month. As the interest-only mortgage payments were £350 per month, the excess income was used to pay off the loan.

Result: the elderly lady’s fees were fully funded and her family will own the property outright in the not too distant future.

Eight years at £1,000 per month adds up to £96,000, not allowing for inflation linked annual increases, so the £72,000 for lifetime care was money very well spent.

Market conditions now mean a bigger investment is required to buy such a care package, so it is even more important to get the right advice.

In my opinion taking out a long-term care annuity package avoids the pitfalls of deposit accounts (what if the bank goes bust? The Government guarantees only £85,000 per institution) and the risks of the stock market.

Each family is different and there is no universal solution that will suit everyone. Make sure you seek advice from a fully qualified Independent Financial Adviser who will look for the best options for your family, providing peace of mind and reducing stress.

 

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