There is no rehearsal for the time when a family member needs long term care. Sometimes this is just on domiciliary basis but, if the person needs more than just basic help, these needs cannot be met without residential or nursing care. It is at this point that any hopes that person may have held of leaving an inheritance for their loved ones disappears when faced with prospect of having to sell their home to meet average yearly bills of over thirty thousand pounds to pay for their care.
The current position is that people have to fund the costs of their care if they have assets including their home, above 23,000 in England and Northern Ireland, 22,000 in Wales and 22,500 in Scotland. There are some exceptions to these rules but these are very limited in scope and the move most people make next is to investigate any help available from local charities but this is usually on a temporary basis as charity resources are limited.
One of the most effective solutions used in care fees planning is a care fees plan also known as an Immediate needs Annuity. The cost is governed by an individual’s age, gender and medical condition, which is assessed on receipt of a medical questionnaire from the residential home and the person’s G.P.. The more ill and fragile a person is – the smaller the premium cost as, the price depends on the insurance company’s view on the individual’s expected lifespan.
The care fees annuity solution is a much underused method of ring – fencing a family’s assets as, once the future costs of care have been covered plus a margin for any extras, it puts a stop-loss on the situation and any amounts remaining are likely to become an inheritance for those mentioned in the Will.
When a person is in care, as long as the monthly payments are paid to a registered care provider ie one registered with the Care Quality Commission (CQC), these payments do not affect the care recipient. These very practical plans are flexible as well as tax-efficient as, should the care recipient recover and be well enough to return home, the net payments can be paid to them directly to help them pay for any care they need to cope in their own home. If the benefits are then paid to a person directly, as with any other pension arrangement, they will have 20% tax deducted at source by the annuity provider. But only on a tiny element of the income.
If there is an inheritance tax liability, the purchase of an immediate needs care annuity can also be a very tax efficient way of reducing this liability as the cost excluding any capital protection can be deducted from the estate – effectively purchasing the means to pay for the care with a forty percent discount.
Finally, it means that the following aims have been attained:-
A finite amount has been allocated plus a contingency to cover any unexpected events and the costs have not been allowed to run away with the remaining estate.
The costs of care have been ring-fenced. Also the person in care has certainty of their care and retains their dignity and choice in the matter.
The capital amount is at its lowest when the lump sum has been paid. Once this has been done, all future costs to the amount covered by the premium paid, are covered, thus giving any monies the chance to regenerate the estate.
It is so important that families use the skills of an expert financial planner who has experience in dealing with long term care so that they ensure that they receive correct advice, as this is one time when making the right decisions really can make all the difference to a family’s future.
Before you implement a long term care annuity policy that will protect against huge care fees just access your remarkable free article written by barbara Davies, CEO of equityCare
Tags: annuities, Care, Costs, Elderly, family, financial, home, home insurance, Insurance, Long, Nursing, Plans, policies, Residential, term