Long Term Care

As we are all now living longer the costs of providing care in our old age and how we fund for this are becoming a concern for more and more of us. Insufficient planning can have a huge impact on the quality of care you receive and where you receive it. The subsequent standard of living for your spouse or partner along with the overall impact on the value of the estate you leave to your family, are all issues that each of us should be considering as part of our overall financial planning.

The average life expectancy in the UK continues to increase and the current averages are:

Supplied by Office for National Statistics

Over the last 25 years the percentage of the UK population over the age of 65 has increased to 16% and this is expected to increase further to 23% by 2033 compared with 18% of the population aged 16 or younger by the same year.

As a result of increased life expectancy and shift in the demographics of the UK the strain on any state provision/aid for long term care will become more and more acute meaning the need to plan for the potential costs of long term care will become more important.

The average cost of care in the UK is shown below along with the rise from 2008 to 2009

Source: A-Z Care home guide, 2008-2009

Currently if you have assets below £13,750 in Scotland (£14,000 in England) the local authority will meet the costs of your care. If you have assets of £13,750-£22,500 in Scotland (£14,000-£23,000 in England) a reducing scale of help will be provided and if your assets are over £22,500 in Scotland (£23,000 in England) you will be expected to fund your own care. Importantly your home can be included within the definition of assets although there are circumstances where it is disregarded; advice in this area should always be sought from a qualified adviser such as Thomson Shepherd Ltd.

There is some state assistance to help with the costs of long term care but this is dependent on where you live. These are outlined below:

There are many things that can be done to plan for the costs of long term care and at the same time ensure that the majority of your assets are passed on to whom you wish on your death. For many of us our homes will be our main asset and it is important that any planning surrounding the home is considered carefully. It is often beneficial to include your solicitor in any such planning/discussions.

It is important not to fall foul of “deliberate asset deprivation” in any planning that is done for long term care. This is defined as deliberately depriving the local authority of an asset that could otherwise have been used to meet the costs of care.

Some of the ways to help fund for care include: -

• Equity Release
• Capital investment from the sale proceeds of a home
• Borrowing against your home
• Existing income
• Family contribution
• Savings accounts
• Investments
• Long term care annuities/impaired annuities

Each area will have its own issues and risks to consider and the most suitable solutions for you will very much depend on your individual circumstances. Some of the issues to consider are: -

• Why is funding required?
• Are you willing to take a risk with your capital?
• Do you want tax efficiency?
• Do you want to retain ownership of your capital?
• Should you use a combination of savings, investments and annuities?

It is important that all potential avenues and options are discussed and considered with a suitably qualified adviser such as Thomson Shepherd Ltd. 

It is also important when considering the impact of long term care and any potential solutions that you also consider any inheritance tax planning you may have made or wish to make as these two areas of advice are very much intertwined.

Giving advice in the area of long term care is very complex and the above is only meant as a summary of the key issues to consider. We would be happy to discuss your individual circumstances and needs in more detail.