The best time for planning long term care is before you need it. You can never know for sure if you, or your spouse, will need long term care. Hopefully, you’ll never need it. However, the longer we live, the higher the probability of illness or injury changes your situation with little warning.
Recent research from the Just Retirement Partnership Group ,shows that only 6% of over 45 year olds are planning for long term care, despite that two thirds believe they may be forced to sell their home to pay for it.
Long term care planning enables you to find out about community services and what they cost. It gives you time to make important decisions with your loved ones, while you can.
Most of our clients start to think about being cared for when they are unable to as they approach retirement. They consider coping with the costs of paying for long-term care, either for themselves or a partner. Or you may find that you are caring for someone who can no longer look after themselves.
You will need to make decisions about your health, housing and finances. Many of these will have tax and legal implications that you will need to get advice on. If you have been diagnosed with Alzheimer’s’ or another cognitive impairment, you should start planning long-term care as soon as possible.
Types of long term care
Your local authority is going to be your first contact when you need care. They will carry out a needs assessment to work out what kind of help you need, what care is available and how much of it you will have to pay for.
This is a bureaucratic process to see if can be provided in your home or in a care home. What the local authority offers you will be based on how much money you have to pay for care, such as what kind of care you need and where you want to live.
Paying for long term care
When the local authority decides your care needs are eligible for their support, they will review your financial situation to work out how much you have to pay towards the care you need.
Your contribution will depend on your assets, savings and the income they provide. If you move into full time residential care, the value of your home will be included too. You won’t have to pay for your care in one go, as Councils have to offer you a “deferred payment” arrangement. The council lends you the money, at a low rate of interest, to pay for your care against the value of your home. Interest and the capital borrowed is paid back, typically when you die.
Paying for your own long term care
You may not qualify for funding from your local authority or the NHS. If you do, your income may not be enough to cover all your care costs. So you’ll need to consider how you’re going to top up any contributions or pay for it all yourself. For most people, the biggest fear is being forced to sell your home.
Fortunately, there are other options available.
Downsizing will enable you to sell your home and buy a smaller, lower cost one to free up cash to pay for your care.
Equity release provides a lump sum or fixed income to pay for care using the value of your home, while you carry on living there. You can read more about this by clicking here.
Investment bonds you can invest in financial instruments that offer a prescribed outcome like bonds. However, no investment is guaranteed and your money is tied up for a long time. So, they may not be the best option.
Deferred payment agreements means you don’t have to sell your home to pay for care straightaway. Your local authority will reclaim what you owe in fees at a later stage when the house is sold, so there is no delay in getting access to care.
If you would like to make better provision for your long term care, or are worried about how this affects your parent, please get in touch today.
Some more things to consider about equity release
- While some plans may enable you to make provision for your family when you’re gone, they will not be able to inherit your home or its full sale value.
- Your income could be adequately improved by checking you receive all the state benefits and grants you are entitled to.
- An increase in your income might disqualify you from certain means-tested benefits.
- There will be some legal proceedings to sort out, like when you buy or sell a house, which may involve legal fees.
- Obtaining similar amounts of money could be possible by selling your house and moving to a smaller home.
- If equity release is not suitable for you, your adviser will tell you and aim to help you find another way to generate funds.
- There may be an early repayment charge if you settle the lifetime mortgage early, details of which will be explained to you.