Could you come up with £180,000 to fund the care of an elderly parent or spouse?
No, not many of us could put our hands on that kind of sum easily. Selling property might be our only solution, and that’s an unsatisfactory move for all concerned.
Yet that is the amount it has been calculated that long-term care could cost for an elderly person in the South East if they live more than four years.
Ah, you may say, but what about the Dilnot Report? Commissioned by the Government and published in the summer, it recommended capping lifetime contributions to social care costs to £35,000.
It also suggested people should contribute no more than £10,000 a year to their food and accommodation costs whilst in residential care.
Well those proposals won’t come into force until 2013 if at all, and if the calculations of some analysts are to be believed, some of those needing long-term care could still face that £180,000 bill.
So what are families who want the best care for their loved ones to do? The sensible answer is to start planning, saving and looking for inventive ways to raise that money as soon as possible.
A qualified, independent financial adviser will be able to suggest strategies families may not have thought of, such as an equity release mortgage that gives them access to funds without selling the family home.
My advice would be not to panic, but to arrange to talk through all your options with an expert.
It is a little-known fact that many couples in their 60s would benefit from splitting their assets and investments 50/50 and holding them in separate accounts in case either of them ever needs long-term care.
Why? Because a person must fund their own care until their assets are down to the last £14,250, when the local authority will foot the bill. All their income will also be used, except for £22 a week spending money.
But local authorities have no right of access to financial information on the partner or spouse and cannot touch their assets.
If savings are split evenly in separate accounts, only half the couple’s money will be swallowed up in funding long-term care fees. The partner or spouse’s assets are fully protected (and they still have the option of paying a top-up to the care provider for better care and accommodation than the local authority is prepared to pay for.)
I meet an awful lot of clients who put the bulk of their savings into the wife’s name simply because she is a non-taxpayer. In ordinary circumstances this is a sound idea, but if the wife falls ill and care funds are needed it could prove costly.
Couples should also beware of putting all or most of their savings into one institution. One couple I visited recently had everything with the Halifax, albeit in different accounts.
The problem is that they only get Government protection in case the institution goes bust up to a maximum of £85,000 per person per institution – and in the case of the Halifax, the one ‘institution’ also includes Lloyds/TSB, Bank of Scotland, Cheltenham & Gloucester and Birmingham Midshires!
An independent financial adviser should be able to suggest ways to help.
I was very gratified to see that the Dilnot Report into funding care for the elderly has been much in the news since it was issued on 4 July and looks like it won’t be swept under the carpet by the Government. Previous administrations have quickly buried reports urging the state to fund a bigger share of Long-Term Care Fees so the burden on the elderly and their families is reduced.
Economist Andrew Dilnot recommends:
- Allowing a person to keep assets of up to £100,000 before they have to fully fund their own care, rather than £23,250 as now.
- Capping lifetime contributions to social care costs to between £25,000 and £50,000, with £35,000 preferable.
- People contributing a maximum of £10,000 a year to their food and accommodation costs whilst in residential care.
In my experience very few elderly people or their families have any knowledge or experience in arranging care or, just as important, how to fund it. The report suggests local authorities could take a key role in pointing people to suitably qualified Financial Advisers
for much-needed financial advice. This would be a breakthrough, as council and GPs have been reluctant to do this in the past.
One of the best places to find a suitable Independent Financial Adviser is on the website of the not-for-profit Society of Later Life Advisers whose rigorously vetted members specialise in this subject: www.societyoflaterlifeadvisers.co.uk
A real boon would be the return of pre-funded Long-Term Care funding contracts, which UK financial institutions will hopefully offer again if the Dilnot Report is implemented. That would greatly assist the public in planning for a comfortable and stress-free old age. Watch this space for more information.
I’m finding it heartbreaking to see the fear and dismay of families whose loved ones are residents in Southern Cross care homes.
To those living in long-term care, stability and continuity are paramount. Familiarity is so important, as is trust in their carers and confidence that life will bring no unexpected upheaval.
Instead, the 31,000 residents in the company’s 751 care homes and their families are facing months of uncertainty and the prospect of worrying disruption as some homes are to be closed and staff sacked.
The plight of the residents of Southern Cross, the UK’s largest care home provider reeling from half-year losses of £311 million, reminds us how important it is to make sure we have financial plans in place to ensure stability and continuity of care for our elderly relatives.
Without proper planning, families can find they run out of money when trying to fund long-term care, meaning a loved one has to move out of a home in which they have been comfortably settled.
Sometimes it’s a case of unlocking local authority funds to which you may be entitled – but which councils may tend not to shout about.
Sometimes it’s a case of finding creative ways to realise family assets, such as through equity-release mortgages.
From my own personal experience, I know how important this is. I’ve been advising families for 30 years and I arranged care for my own elderly parents.
Because of my work as a volunteer with charities such as the Alzheimer’s Society and in-depth training with Age Concern, I’m now one of very few financial advisers locally with this specialist knowledge.
Long-term care funding requires sensitivity, empathy and expertise. Advice from an independent financial adviser is highly recommended.
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. Continue reading “Funding long-term care – without selling your home”
It’s very sobering that a place in a care home for the elderly can cost £40,000 to £50,000 a year – few of us could meet such charges from our normal monthly retirement income. Continue reading “Saving the elderly from care-funding distress”