A large part of our work here at Morton Fraser in the Wealth Management team involves dealing with family members who have a parent in care and Attorneys (who act on behalf of clients), so we are well aware of their concerns and the issues affecting care planning.
In my experience, many clients these days are concerned about having to go into care at some point in the future. They worry about how the care costs can be met whilst trying to avoid draining away all their hard-earned savings. Invariably, they're keen to try and leave something for their children or next of kin. Understandably, there's a real fear about getting to the position where their savings have dried up, yet they still require the care.
For married couples, where one spouse goes into care, there is the additional worry that the family home may need to be sold at some point. At the moment, legislation provides some comfort here: the family home will not be sold as long as the other spouse continues to remain in it.
In Scotland, and in relation to residential care homes, care is divided into three parts – the costs of accommodation; costs of nursing care; and the cost of personal care. The Local Authority will currently pay for nursing care at a flat rate of £77 per week, and personal care at a flat rate of £169 per week but the rest of residential care home costs are means-tested. Those with "assets" deemed to be above the upper means test limit of £26,000 in Scotland will find they need to fund the rest of the care home costs themselves. These costs can be substantial. In Edinburgh, for example, I've seen care home costs touching £60,000 p.a. – even after Local Authority assistance. Typically, these costs will tend to increase each year at a rate in excess of the Retail Prices Index (inflation) level, so this can cause additional planning issues.
Furthermore, there is no guarantee that the nursing and personal care allowances will still be funded by the Local Authority this time next year, or indeed, several years down the line. In any case, very few clients wish to get to the point where they have to rely on such assistance, in my experience. In the past, it was possible to "pre-fund" for long-term care planning by building up lump sums in specialised savings vehicles which would typically provide an income for life at the point of claim. However, this type of product is now no longer available for new investors.
As a result, most of the planning we have done in this area in the last few years has been around providing advice on long-term care annuities. These aim to provide a guaranteed level of income for life and, if paid directly to the care home, the income payments are tax-free. To cope with rising care home fees, we can build in annual rises in line with RPI or set rates, and this can greatly help with security of payments. We have found this type of planning provides some peace of mind for our clients and takes some of the fear out of the prospect of long-term care.
If you would like more information for funding long term care, please feel free to contact me on the details below.