Long Term Care
Most people are aware that paying for long term care can be a problem but it is not usually appreciated until the time…
….that care is needed by them or a close relative. The demographics of the UK population show a growing trend for the elderly needing some form of long term care. The Government estimated that, in 1995, over 20% of those aged over 70 were in need of long term care assistance (The Royal Commission on Long Term Care – March 1999).
What is long term care?
Long term care is the generic name given to the provision of accommodation, medical support and care for the well being of individuals, including the elderly, who are not able to look after themselves.
As people get older they start to find that some of the simple tasks such as moving about the house, washing and preparing meals can become more and more difficult. Proper care is more than just helping with these simple daily tasks (often referred to as Activities of Daily Living – ADL), it is about looking at all the factors that contribute to a person’s well being. This includes mental as well as physical health and consideration of the immediate environment.
What are the care options?
Care in the home
Most people would naturally prefer to stay in their own homes when elderly or incapacitated. This is often possible for those who only need help with basic activities and this type of help can be provided by specialist care agencies, including specially trained nurses. This formal help can be available even if family members are on hand to give assistance.
Care homes can offer different levels of care. Some tend to accommodate those who need help with normal daily activities and who also require companionship. Others also have fully qualified nursing staff to deal with additional medical attention and will be registered as providing nursing care.
The decision to enter a care home is often one of the most difficult an individual and their family have to make.
The role of the Local Authority
The Local Authority has an important part to play in the provision of long term care. Local Authorities are legally obliged to help with care fees for elderly people who do not have enough money to pay their own fees. If a person’s assets are less than a certain amount, the Local Authority is duty bound to assess their ability to pay for care but it should be noted that different authorities have different eligibility criteria. Although someone may not qualify for financial assistance immediately, they might qualify in the future. It is therefore advisable to involve the Local Authority from the outset.
That is the cost of care?
The cost of care depends not only on the type and quality of care but also where you live in the country. An elderly person does not have to be in a care home to incur fees. Health care assistance can be provided in the family home and the costs can vary quite considerably.
Who pays for the care?
The most important rule is that those who have more than a certain amount of capital will be expected to pay the full cost of their care and will not qualify for any financial assistance from their Local Authority.
It should be noted that the Local Authority have far reaching powers to take into account any money that they believe has been deliberately given away in order to qualify for State assistance.
For those that are assessed as requiring nursing care, a contribution is made towards the cost of care. In some areas this will be funded by the NHS rather than the local authority. The amount will depend on where you live and, in some areas, is also based on the level of care that you are assessed as requiring.
The family home
The value of any residential property, including an individuals own home, will usually be counted as capital. However, the value of the family home or normal residence may be excluded in specific circumstances. For example, the value of the family home is not counted as part of an individual’s capital for the first 12 weeks after entering care permanently.
What are the funding options?
For many the family home will be their largest asset but some families are able to use other assets to cover the cost of care without having to resort to selling the home.
Fees may be paid from income, but even very wealthy people may find that the cost of care, in time, will inevitably deplete their capital.
Immediate needs annuity
To qualify for an immediate needs annuity, the individual should be in, or about to enter, a care home or require domiciliary care as a result of a medical condition.
This special type of annuity pays an enhanced income direct to the care provider for the life of the annuitant. As with all annuities, the capital is invested in exchange for an income, so there are no further payments after the death of the policyholder. Once the annuity is purchased, the capital that has been invested is gone forever.
The amount of the annuity will depend on age, gender and state of health and is usually aligned to an assessment system called the Anderton Diagnosis Index. This primarily assesses the severity of the applicant’s condition and combines it with their ability to perform certain ADLs.
Even if an individual has more than the capital threshold to qualify for assistance from their local authority, they may still qualify for financial assistance from the State depending on their needs.
Attendance Allowance is not means tested and can be paid to anyone over the age of 65 who is eligible. (For those under 65, Disability Living Allowance may be available). There are two levels of benefit payable depending on the level of help required.
Income support may also be available, although this will depend, amongst other things, on an individual’s age and level of savings. Enquiries should be made to the Department for Work and Pensions.
Transferring assets and deprivation of assets
It is tempting for people to consider giving away capital or property in order to qualify for State assistance. However, this is not permitted under Local Authority rules and legal advice should be sought when considering transferring savings or property to someone else.
Enduring Powers of Attorney
It is important to consider the legal implications of an attorney acting for someone who may need long term care. The power may not specifically give authority to make decisions about care and it may be necessary to seek professional advice.
If there is a common theme to long term care, it is that it is unpredictable, expensive and can be very stressful. However, a lot of the problems can be avoided. With careful planning, professional advice and the appropriate financial policies, it is possible to remove many of the problems associated with providing care and financial support in old age.
Who do I contact?
If you would like any further information on these issues, or would like to speak to one of our Financial Planning specialists regarding any other matter, please contact your Independent Financial Advisor or use the is4profit service to Find an IFA.