All you need to know about Funding your Care
Do you or your relative need care and you are unsure about how it will be paid for or what you are entitled to? Andrew Dixson-Smith, financial expert for yourcarehome.co.uk and Director of Casesenior.co.uk provides a summary...
What options are available to pay for my care?
If you need to pay for your own care, there are a number of methods you can use.
Moving into permanent residential or nursing care, means that the care fees you pay will usually cover all your living costs (Food, Electricity, Council Tax etc) as well as your care needs, so most of your income can be used towards payment of your care fees.
The remaining shortfall between the care fees and your income, will then need to be covered by making use of any savings and investments, or from the sale of your property. You could choice any of the following methods to cover this shortfall:
• Using the income generated from savings/investments
• Using the capital from savings/investments
• Purchasing a special Care Fees Annuity
The most suitable method will depend on your specific financial circumstances, but for a number of people, the purchase of a Care Fees Annuity has a number of advantages:
• Peace of mind, that the benefit is guaranteed to be payable for life, effectively putting a ceiling on the costs, rather than paying from capital on an open-ended basis.
• Because the benefit is paid directly to a registered Care Provider, this will be completely tax free and will not affect any allowances being received
• An escalation option can be included, to offset future increases in care fees.
• The premium is calculated on the specific health details of the person needing care, rather than just based on a general rate for their age group. This will generally mean that a lower premium would apply, compared to an annuity for a person in full health.
• Where the total assets exceed the Inheritance Tax (IHT) limit, making a payment to a Care Fees Annuity will immediately reduce the level of assets liable to IHT, leading to a potentially significant saving in Tax.
What if my home is my main asset for paying for care?
If your assets, excluding your home, are less than £23,000 you can approach the Local Authority for some initial assistance in paying your care fees.
If your income alone will not cover the cost of your care, the Local Authority will make a contribution towards the cost for the first 12 weeks, which will not have to be repaid to them.
At the end of the 12 week period, if your property has still not been sold, the Local Authority may be prepared to pay your care fees, as a loan. A charge to cover the loan will be placed against your property, and the loan (and any interest charged) will need to be repaid to the Local Authority once the property is sold, or within 56 days of your death.
Please note that the continued loan facility, after the initial 12 week period, is only available at the discretion of each Local Authority, in accordance with their budgets etc.
Alternatively, there are also some companies who provide an ‘Assisted Move’ service. In addition to managing the sale of your property, they also offer facilities to enable you to move into care without the need to wait for the property to be sold. These include:
• A ‘bridging loan’ (which sometimes includes an interest-free period).
• A monthly advance, to pay the initial care fees.
• An ‘immediate sale’ facility, for up to 90% of the property value.
What benefits are available to pay for my care?
If you are paying for your care (either in your own home or in a Care Home) you can apply to the Local Authority for payment of ‘Attendance Allowance’. This is paid at two levels, and is tax-free.
If you are assessed as needing care during the day only, or during the night only, you will be paid the lower rate of £47.10 per week. If you need 24 hour care, you will be paid the higher rate of £70.35 per week.
If your care needs are predominately medical, and you are receiving care in a Nursing Home, you may also qualify for NHS funded ‘continuing care’. Basically, the more medical conditions you have, and the greater their complexity, the more chance you have of qualifying for this payment. There is one level of payment of £106.30 per week, if you qualify.
Will the Local authority pay for my care?
The Local Authority will carry out a care needs assessment to identify the level of care required. If a need for care is identified, the Local Authority then has a duty to provide for your needs. You can make an appeal if you feel that your needs have not been accurately assessed.
However, when it comes to paying for care, the Local Authority will only consider paying for those who have assets (including your home) of less than £23,000. If you pass the ‘asset test’ you will still be expected to contribute a part any regular income you receive, towards the cost of your care.
If the Local Authority pay for part or all of your care, the place where you receive that care will be restricted to a home of their choice. Their duty of care extends only to the requirement that the home are able to provide the level of care identified for your needs.
You can choose a home in a different location, or which provides a higher level of social facilities etc, but this would have to be in line with the Local Authority’s payment limit, unless a family member is able to make a ‘third party top-up’ to cover the difference in cost.
Andrew's Top Tips for Financing Care
1. Are you entitled to Attendance Allowance (AA)?
Frequently unclaimed AA is a tax-free, non means tested benefit, of up to £70.35 per week for people aged 65+ who are physically or mentally disabled and need help with personal care. Ask for our free fact sheet!
2. Consult a professional with a qualification
For professional advice always consult a specialist but in any event, a Financial Adviser must hold the Chartered Insurance Institute (CII) CF8 Long Term Care Qualification. An Accreditation for the Later Life Adviser was launched in April 2008 and in January this year, The Society of Later Life Advisers (SOLLA)was also launched to ‘kite mark’ this area of specialization in financial planning. Andrew is an Advisory Board Member of SOLLA.
3. Look into Immediate Needs Care Fees Payment Plans
Similar to an annuity, these plans are designed for people who need to self fund their care costs. They provide a tailor made, regular, guaranteed, tax free income for life.
4. Release capital and/or income from your property
A lot of people struggle with costs of running their home and care fees from income. This can be overcome by releasing money from the equity in your property. We can signpost you to a specialist who only advises on products that have the Safe Home Income Plan (SHIP) kite mark.
5. Set up a Lasting Power of Attorney
We recommend you set up power of attorney that enables someone to act for you if needed. For professional advice on this and existing Enduring Power of Attorney, contact a Solicitor who is a member of Solicitors for the Elderly (SFE).
To discuss any of these tips or to find out more details, visit www.casesenior.co.uk
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12 April 2013