Long Term Care

Long Term Care Issues

If Long Term Care is needed, and if the cost of this care cannot be funded from income alone, your other assets must be used to meet the shortfall until such time as the value remaining is relatively low. This leads to many potential problems, including: - 

ü      When capital and other assets have been more or less exhausted, the Local Authority should contribute towards care, but this may mean less choice of care provider. Frequently this will lead to a “forced” move to a less expensive room, or even to a less expensive Care provider. 

ü      A high level of capital has to be kept available on deposit and this may prevent it from being invested properly for what may become a long-term need for income.

ü      Legislation prevents capital and assets being given away in order to bring forward Local Authority contribution to care. This inability to act may then inhibit other necessary financial planning actions.

ü      If you have been receiving care in your home, the Local Authority may insist that you are moved to a care home if this is a cheaper option. 

An Alternative Solution – The Immediate Care Plan

As an alternative to using assets to supplement income in order to meet the cost of Care, it is possible through specialist insurance providers to commute the cost of future Care (at an agreed level) into a single lump-sum payment, made at the time Care is first needed (or at any time afterwards). This works very much like an Annuity, but with special features.

How The Alternative Solution Works

ü      The unknown series of future payments are distilled into a single payment, leaving freedom to invest other capital for the longer-term, perhaps in a way that will also offer potential Inheritance Tax savings.

ü      Because the Insurance provider will generally make all payments direct to the Care Home, those payments will not generally be taxable as income for the care recipient.

ü      Provision can be made for Care payments to increase with inflation.

ü      Although, as with a normal annuity, the Care payments will cease on death, it is possible to incorporate some protection, so that the lump sum payment is not lost completely in the event of death happening soon after the plan is taken out.

ü      Because the initial lump sum payment will reduce the Estate of the Care recipient, it is often the case that the real cost will be reduced by potential Inheritance Tax savings.

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