Long Term Care Planning
Planning Ahead

Planning ahead for Long Term Care
can make all the difference

Those of us who are concerned about possible future care costs may be anxious to avoid two main risks - that we won't have any control over what happens to us and that the costs of care will spiral and eat away our estate.  

Professional advice can alleviate anxiety over these areas by helping you understand what will happen if the need for care arises and by ensuring that you and your chosen attorneys are prepared to retain control of your circumstances and finances.

Most importantly a financial adviser qualified to advise on long term care can assist you in putting in place the most suitable strategies and will be there to review and arrange them if the time comes.

 Protecting Your Assets

Protecting your assets is often a high priority for those concerned about possible future care needs.  We strongly recommend taking professional advice when addressing this area as poor strategies may be ineffective or could even be classed as 'deprivation of assets' - essentially defrauding the state.

There are options which may legitimately reduce the exposure of your estate to care costs.  Firstly, if you are a couple it's important to understand that jointly owned assets may potentially be at higher risk, with the whole asset open to either of your care cost liabilities.  This is because you legally own the asset together and not as two separate halves, so one owner's liability could threaten the whole asset. The classic example is of course the family home which many couples own as 'joint tennants'.
The solution to this may be to split the ownership of your home or other assets into solely-owned halves, which in property ownership is known as 'tenants in common'.  Typically this is accompanied by Wills utilising trust instruments to safeguard each spouse's half of the property after the death of the first spouse.  This strategy may or may not be suitable for you depending on your circumstances and there can be significant downsides, for example it may make it difficult to release equity from your home in future.  It's important to take professional financial advice before doing this.

Additionally there are some forms of investment which are typically assumed to be 'non-assessable' by local authorities when they assess your finances to decide who should pay for your care.  If this were the case at the time of assessment then such an investment would be effectively 'protected' from long term care costs.  Normally these are investments written as life assurance contracts, however it's very important to bear in mind that this may be an imperfect strategy for the following reasons;

  • We believe it is very possible this strategy will fail in the future as legislative change may render such investments fully assessible by the local authorities.
  • Placing funds into such investments specifically to avoid long term care costs could be deemed to be "deprivation of assets", in other words deliberately trying to avoid care costs and burden the state.  If this were the case, the local authority would likely be empowered to fully assess the investment as a normal asset.
  • If you have a home or other assets these may still be at risk.
In short, though a life-assurance based investment bond may be an appropriate part of your investment planning toward future needs including long term care, we would not recommend taking such an investment specifically for the purpose of 'protecting' the funds from long term care.

Insuring The Risk

Long Term Care insurance policies may be available, however the choices have fallen significantly in recent years as many providers have exited the market. This may be due in part to 'demographic change' as our ever extending life expectancies increase the possible future costs of care.  It is quite possible that life expectancies will continue to increase, so we don't expect this industry to reach a position of stable maturity any time soon.

It's common for care insurance providers to place restrictions on their product, for example there may be a minimum claim age, a minimum acceptance age, limitations on the type of care that will be paid for and limitations on the length of time in care which may be paid for.  We recommend that policies be taken to provide care for as long as it is needed wherever possible.  Generally care insurance policies will only pay for care requirements - meaning you may not be able to elect to move into a nursing home and claim on the policy to meet the costs but would be able to claim if care were deemed a necessity.

A financial adviser will discuss these issues with you in full before recommending the most suitable solution.  Policies may be available with monthly premiums or a single one-off 'lump sum' premium and the price is likely to have a great deal to do with your age, health status and family history.  Normally the younger and healthier you are the more likely you'll be able to insure this risk in an affordable manner, whilst those who are older or in poorer health may find it more difficult to find an affordable policy.  The good news for those in such a position is that the cost of an 'annuity' to meet care costs when they arise may be correspondingly lower, so if an insurance solution is not affordable it might be more suitable to commence saving or investing toward a solution at the time of need.  For more information on immediate-needs care annuities see our page for people entering care by clicking here, or for more information about saving and investing toward long term care, read on.

We strongly recommend that all persons seek professional, independent financial advice before taking any action regarding care insurance.

Investing or Saving toward Long Term Care

If a requirement to fund long term care should arise, 
the next best thing to having an long term care insurance policy in place may be to have a significant lump-sum to meet your care needs.

Investing toward potential long-term care costs may form part of your broader investment and retirement planning.  Indeed most investments and savings vehicles which can produce an income may be used to pay for care costs annually and some, such as pensions and ISAs, can offer significant tax advantages.  Investments which allow you access to your funds as a lump sum may allow you to purchase a care annuity.

The level of risk you take with your investments is always your own choice and a professional adviser will recommend the most suitable solution within your own preferences.  If you are comfortable with investment volatility and feel you won't need access to the funds for at least five years then an appropriate investment portfolio might be suitable.  If you are less comfortable with investment volatility then a lower-risk, 'guaranteed' or cash-only option might be more suitable.  For more information on investment advice, click here.

Lasting Power of Attorney

We'd strongly recommend that all persons should consider taking lasting powers of attorney.  These are legal documents which ensure that the people who will make decisions for them if they are unable to are the people they choose.

Although some might assume that our spouses or close relatives would automatically be allowed to make choices for us, this is not the case - if we do not make a Lasting Power of Attorney in advance it can be a lengthy and expensive process for our loved ones to gain control of our affairs.

A Lasting Power of Attorney allows you to grant the people you choose the power to make decisions on your behalf in certain circumstances.  It can be flexible - LPAs can be written to allow multiple attorneys to act jointly, solely, or in different capacities.

There are two different types of Lasting Power of Attorney - to read about each type see our Lasting Powers of Attorney page by clicking here.  We'd recommend that anyone concerned about long term care should consider taking out both types of lasting power of attorney.

Next Steps

If you'd like to discuss your options, do feel free to contact us.

Telephone:   02920 009 479 
email:   enquiries@whitchurchifa.co.uk

Or you can message us from this website by clicking here.