A hot topic at present, particularly in the light of the Dillnot Report earlier this year, is the funding of long term care fees. Despite media reports suggesting otherwise, statistically few people will need care but the prospect, and the potential costs, looms large in most people’s minds when thinking of their futures.
There are four ways in which care costs can be met:-
1. By the patient personally – self funding
2. By the Local Authority
3. By the NHS
4. By careful use of investments
With care costs running at as much as £1000.00 per week, self-funding is not a long term option for any except the very wealthiest since it constitutes an indefinite drain on resources leaving little for the family to inherit.
Funding from the Local Authority is means-tested and only available once a person’s resources have dropped below £23250.00. Even then, the patient must make a contribution until those resources have dropped to £14250.00.
If a person’s health needs are severe they may be eligible for NHS Continuing Healthcare under which the NHS pays all the costs without any contribution from the patient or means testing. Eligibility is determined by the Primary Care Trust and can be a long winded as well as a frustrating process.
The final option is, in many cases, the best. In this case, the patient’s existing income is supplemented by the judicious use of investments to bridge the gap between that income and the care fees. Often, this involves buying an ‘immediate needs annuity’ the income from which is paid directly to the care home tax free. The intention is that the capital cost of the annuity should represent the only drain on the patient’s capital resources. The gamble the patient takes is that they don’t live long enough to justify the expenditure. The gamble the insurance company takes is that the patient lives longer and costs more than the capital invested!
In all cases, maximum use should be made of available State benefits combined with appropriate investment advice from an IFA who holds the Later Life Adviser Accreditation and appropriate legal advice from DO.
For more information on this article contact Susan Glenholme
