Funding Options For Long Term Care

We don’t know what the future holds for us and this is very true about Long Term Care issues. All we do know is that generally people are living a lot longer these days and ever increasing numbers are needing help in later life. To add to the difficulties, families are often many miles apart and unable to be of much help on a day to day basis.

Because of this, in the majority of cases no financial plans have been put into place beforehand, so what can you do?

Liquid Assets. This is where you simply use the person’s savings or investments to pay for any shortfall in care costs that their income can’t cover. The problem with this is that you simply don’t know how long the money will last.

One solution that could be looked at is an Immediate Needs Annuity. This is where a capital sum is given up in exchange for a guaranteed level of income for the rest of the person’s life. This means that there is peace of mind in knowing that “the money can’t run out”, although nobody can control how much care costs may rise in the future.

So long as the payments go direct to the care home, they are tax free, which gives an advantage over normal annuities. Also the amount of income offered will only be decided after being medically underwritten, so again this can make a huge difference to the amount as the income will reflect the anticipated life expectancy. You can also arrange for the income to increase each year to help offset any rises in care costs.

You also need to consider potential downsides, the person may die sooner than expected and care cost may go up faster than expected. As with any annuity you need to make sure it is the right thing for your (or your families’ needs) and getting the right advice is important.

Our specially qualified advisers will be happy to discuss the advantages and disadvantages of these types of plans to you and will be able to help assess what the income shortfall may be to meet Long Term Care costs and also obtain real figures based on medical evidence as to the capital sum needed to generate the “missing” income.

Property Assets. Many people simply don’t have the level of savings or investments to call on to pay for care costs, especially if there is a spouse who is still living at home and needing to meet the day to day costs of running the home and looking after themselves as well as worrying about finding money for Long Term Care for their spouse.

Although so long as there is a spouse (or civil partner) still living in the marital home the local authority cannot take the value of the home in any means test, the “home” spouse will generally still want the best type of care for their husband or wife and so access to private funds is generally their number one priority.

In any case, given the current state of the property market, with little activity and depressed values, trying to sell a house quickly in order to raise funds to pay for care costs may be neither easy nor indeed the most sensible option.

In these situations using an Equity Release plan may be a suitable option, perhaps with a facility so that funds can be made available as and when costs are needed and further information can be obtained by going to our Equity Release Section.

Property Only Assets. If your main asset is your property and your other assets are below the means test limit you may qualify for the State Supported Equity Release Scheme* where a local authority provides the care costs, dealing directly with the care home and adds a charge on the property when it is sold. During the person’s lifetime, no interest would be added to the charges.
(*Where a property is occupied by a partner or a relative aged 60 or over, or under 16, or is incapacitated, elligibility may also apply.)

Advance Funding. This is an area that has seen a reduction in providers over the
years. By planning in advance, it may be possible to reduce the cost of providing fixed future benefits. Again specialist advice must be taken and if you would like to talk to one of our Independent Financial Advisers simply click on our‘I would like an Adviser to contact me’ link.

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