Paying for long term care

David Hill.LT32--009 PSB
David Hill.LT32--009 PSB

Paying for long term care is an issue that will affect most of us at some time in our life.

Who pays for the care depends on the level of assets that we have. In Northern Ireland, if the individual requiring care has assets over £23,250 then they need to pay the entire cost of care themselves. Some people will try various techniques to try and hide assets, most of which will not work.

As we have covered in previous articles, signing a property over to a child is unlikely to be effective in protecting it against seizure.

In practice, when care is needed the family often would like to choose a home that is both convenient and has a reputation for a great standard of care. Unfortunately, if the care is being entirely funded by the local authority, it is not the family that choose.

What a lot of people do not realise is that the local authority pays a basic contracted rate for the care and a top-up from the family is often required if they want the individual to live in a particular home. So in many cases, giving up assets during your lifetime - even if it is allowed under deprivation-of-asset rules - is counterproductive, and the family end up paying for part of the care anyway.

So how can the impact of paying for care on any potential inheritance be minimised? Well, the most common way to cap the cost of care is to buy an immediate-care annuity.

For example, if an individual who now needs care has £15,000 of pension income and benefits, but the cost of care is £35,000, then a contribution of £20,000 per annum is required to be paid to the care home. The local authority may ask for their home to be sold and the proceeds used at the rate of £20,000 per year. If, in this example, the house was worth £200,000 then this would fund around 10 years of care.

However, if an immediate-care annuity was bought with part of the sale proceeds of the house, it may take considerably less than the sale proceeds to fund an income that meets the cost of care.

The actual cost of the annuity will depend on health and life expectancy of the individual requiring care and if agreed with the care home, it will provide a cap on the total cost of providing for care.

So if you have a parent who requires care, always check the cost of an immediate needs care annuity with a suitably qualified financial planner.