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When it comes to paying for care, there are several options. Find out more about various considerations when paying for care and best practices.
Considerations When Paying For Care
Costs can vary considerably and will be dependent upon the type of care and level of support you require. This will often be determined through a care needs assessment. With the average annual cost of residential care continuing to increase year-on-year, having to sell your property or other assets to meet care home costs looms large for many. In many circumstances, the cost of paying for care fees means there is no legacy to leave to loved ones.
How to Cover the Cost?
Unfortunately, one in four people who fund their own care run out of money. The problem is that nobody can predict how long care will be required and therefore how long it will have to be paid for, so it’s essential to ensure that the care you choose is right for you and affordable in the longer term. Running out of money means relying on the local authority to fund your care, and there are no guarantees the local authority will wish to maintain the same payment levels.
The Need For Specialist Advice
Given the choice, no-one would opt to see all their hard-earned assets, built up over a lifetime depleted by the payment of care fees. Getting the right advice at the right time can make all the difference.
Abicare has chosen to partner with a Chartered Financial Planning Business to help you talk things through. They can help you or your chosen Power of Attorneys explore the options available and make the right financial decisions, providing you with peace of mind. They are specialist’s in their field and help you understand which of the below options are right for you and your family.
Some of the ways of paying for Care Fees
For most people, paying for care means creating income from the capital and assets that are available. There are a number of ways of achieving this and in general, there are some primary ways of achieving this. It is not the case that any one option will suit everyone, so it is important to assess how each fits your own circumstances:
- Own income: You may receive sufficient income from pensions and existing savings and investments, or rental income from your home, to pay for care in full, or as a ‘top-up’. Even if this is the case, take advice. Itis likely improvements can be made.
- Family contribution: Your family may be able to cover some or all of the cost, or difference in cost, as a ‘top up’.
- Savings accounts: This includes money held in deposit accounts, Cash, Individual Savings Accounts (ISAs) and National Savings.
- Investments: There are many possibilities here, from investment bonds and unit trusts to shares. However, the most profitable are usually the highest risk, therefore a balance may need to be struck. Where the investment is made into equities, the risk is that the value and any income provided may fall as well as rise and you could get back less than the amount invested. This means that they will not provide the security of capital associated with a deposit account with a bank or building society.
- Care Fees Plans (also known as Immediate Needs Annuities): These are specialist insurance plans designed to convert capital into income to help meet care fees. In return for a one-off lump sum you receive a guaranteed tax free income for life, provided that it is paid directly to the care home. The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
- Your Property: The proceeds of a house sale can be used to support any of these options if other assets on their own are insufficient. Equity release: As long as someone is still resident at the property, this enables funds to be released while still allowing the home to be retained (however, the debt has to be cleared on your death). †This is a lifetime mortgage or home reversion plan. To understand the features and risks associated with such products, please ask for a personalised illustration. Rental: Letting out property could deliver a regular income stream but owners need to be sure the net income after bills and allowing for periods of vacant tenancy and management costs, will be enough to cover care bills. Deferred payment agreements (DPA): The DPA enables an individual to access a loan from the Local Authority secured against their property. Interest can be accrued, and the entire debt must be repaid within 90 days of death.
If you would like a no obligation conversation with our chosen partner, please contact us on 03452 410198 and we can arrange it for you.
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