1. Research ahead
You may be unsure of where to start or who to talk to about paying for care, but by looking into how the care system works, the different types of care available, what they cost, and the options open to you if you run out of money, you can get a much clearer picture of what to expect. It’s important to bear in mind that, although you may not need residential care now, this could change in the future so you need to be aware of how much it costs in your local area and how you would go about paying for it.
2. Take a means assessment
If you’ve reached the stage where you need long-term care, your first step is to have your care needs assessed by applying to your local authority to determine your care needs and whether you’re eligible for state funding.
Once care needs have been assessed, the cost of providing your care will be calculated – and then your ability to pay for or contribute to it, known as means testing will be assessed. You’ll need to provide bank and building society statements and any National Savings and Premium Bond certificates you have, as well as details of pension entitlements, property you own and any stocks, shares or other financial products you have.
If you need expert advice, specialist care fees advisers can help you make an informed decision about paying for your care. Make sure your adviser holds as a minimum Chartered Insurance Institute (CII) CF8 or an Institute of Financial Services (IFS) Certificate in Long Term Care Insurance (CeLTCI).
3. Don’t try to avoid care home fees by deprivation of assets
At the moment, anyone in England, Wales and Northern Ireland with assets of more than £23,250, including property, will have to pay the full cost of their care in a home, but many people believe they can avoid care fees by ‘hiding’ or reducing their assets before going into care. This is known as deprivation of assets.
One of the most common methods of asset deprivation is giving your home away to a family member. However, if your local authority believes this has been done deliberately to avoid paying care fees, it will be treated as if you still owned it.
Other examples of deprivation of assets include asset protection trusts, where you can put a property into a trust for someone else, and investment bonds which, technically speaking, are non-income producing insurance products and therefore exempt from the means testing process. Some actions could have quite serious consequences for you and your family and therefore you should seek specialist advice before you enter into any agreements.
For some, the easiest way to reduce their capital is to give away cash to friends or relatives or have a spending spree.
Again, if the local authority considers that you have deliberately deprived yourself of capital, they can take this into account when deciding the level of your financial contribution. So before you rush into making any decisions you may regret, seeking specialist advice is recommended.
4. Grant power of attorney
There may come a time when you’re no longer physically or mentally able to make decisions for yourself. In this situation, it’s essential to grant someone you know and trust the power to manage your affairs so you get the care you need. This legal agreement is known as Lasting Power of Attorney (LPA).
Without an LPA, even close family members may not have the authority to make decisions about your care in old age, your financial welfare or your assets.
There are two types of LPA that can be arranged – property and affairs, and personal welfare. It is advisable to have both so your affairs are fully covered.
5. Take out a long term care plan
A long term care plan involves paying a lump sum to a specialist insurer who will pay out money to help fund your care fees for as long as you live. You can choose immediate funding or deferred funding plans. Money is paid out directly to your Care Quality Commission registered care home, meaning it’s free from income tax. However, if you die soon after the start of the plan, your estate may receive less than the original sum invested.
The average cost of a long term care plan is £100,000. You may think that is a bit on the high side, but when set against average annual nursing home care fees of £38,000, this represents just over two and a half years’ worth of fees.
PayingForCare is a national service for those who are faced with paying the cost of their long-term care. Our impartial and free-to-use service helps older people, their friends, families and carers access the financial information and advice they need to make informed choices.
We work closely with care providers, local authorities, government departments, charities, health services, support organisations and other experts in the care sector to address this complex subject and ensure financial information and advice is readily available.
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