Unless you become very ill, it’s likely you’ll have to pay for most or even all your care in later life. It’s not a situation that many of us even want to think about, let alone plan for. But It’s important to consider the possibility early and save for future care home fees: if you don’t, the consequences may include missing out on state support you’re eligible to, having to sell your house to pay fees and your loved ones not getting the inheritance you want to give them.
Kelly Greig, head of Later Life planning at leading national law firm Irwin Mitchell Private Wealth says, “Care home fees are always something that get pushed to the back of one’s mind. This is leaving the public woefully unprepared for paying for a care home when they need it. The reality is that planning for care home fees should be up there with paying into a pension.”
Paying for care is complicated, and every case is unique. Residential care in a care home is expensive and something of a postcode lottery: in England it
averages £621 a week, rising to £876 for nursing care and a person will stay for an average of 4.5 years. There may be some help available to meet the costs from your local council, or, in some circumstances, the NHS, but the system can be difficult to negotiate.
How is a care home paid for?
More than 400,000 people in the UK live in residential and nursing homes. Almost half pay for this care themselves, the rest receive support, partially or wholly, from their local authority or the NHS:
Local authority – may fund some or all of your care, but relatives or friends may voluntarily contribute an additional top-up fee
Self-funding – you, your family or friends pay all your care costs
The NHS – if you have long-term complex health needs you may be eligible for
NHS continuing healthcare How is care means tested?
If the local authority is arranging your care, it will make a financial assessment to determine how much you’ll need to pay towards it. The assessment takes into account your pensions, income, capital, property, investments and benefits you’re eligible for (whether you claim them or not).
If you have capital of:
More than £23,250 – you’ll have to pay full costs (self-funding)
Between £14,250 and £23,250 – the local authority will partially fund your care and you’ll need to top up the rest
Less than £14,250 – the local authority will pay your fees, although they will take eligible income into account
Will I have to sell my home?
Your home won’t be included in the assessment if you’re arranging your care and support at home, and may not be included if you live with a partner, child or a relative who is over 60 or disabled. The way you own your home (as tenants in common rather than joint tenants) will give the property some protection if you have to go into care – your solicitor will be able to advise you on this.
You could also look at renting out your home and using the income to fund your care (bearing in mind the costs and effort involved, and that rental income is taxable); a deferred system where the local authority pays for your care while you are living and claims the costs back from your property’s sale after your death; or equity release – a kind of remortgaging, but with higher interest – an expensive way to fund care.
If you really have to sell your home to fund your care, you need to maximise the resulting capital by either choosing a high-rate interest bank account, or investing in shares, equities or cash bonds. You could also
choose an immediate needs annuity where you pay an upfront premium that pays out a regular lifetime income for care costs. However, expert financial advice is required before you pursue either of these options.
What benefits am I entitled to?
People in care are still entitled to benefits such as state pension, attendance allowance (if self-funded) and funded nursing care. There are various other state benefits you may be entitled to but not know about (Incapacity Benefit, Bereavement Allowance, Pension Credit to name a few), so it pays to seek the advice of a professional who knows their way around the benefits system and entitlements.
What about care home contracts?
Self-funders pay more for the same care than people funded by the local authority, and there is room for negotiation. Before making a final decision about your care home, and the home makes a care needs assessment, you need to see a copy of the contract. The contract should cover: fees and notice periods for increases, deposits, any trial period, what is (and isn’t) covered by insurance, accommodation type, level of care, additional fees, charges and services, temporary absences, cancellation and notice, and complaints. It’s crucial to check the small print, or run it past a solicitor, particularly regarding services and fee rises. “You wouldn’t get a mortgage without professional advice, so why sign a care home contract without it?” asks Kelly.
Why is it important to plan ahead?
Things can move overwhelmingly fast when someone becomes incapacitated and needs to go into a care home. Does family have a sufficient record of your medical history? Is a Power of Attorney in place? Is your will clear enough about property? How much do you have in income, savings and investments, and where is it all held?
Being brave and having ‘the conversation’ about later life saving and planning long before it’s needed will make any transition to a care home much easier in the long run. “It’s absolutely not a fun thing to think about, particularly when you’re busy with your career, raising a family or maintaining a property – but saving now will mean there’s a much less overhead cost when going into a care home and you’ll have more assets to pass on to your loved ones,” says Kelly.
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