When it comes to financial planning for later life care, have you thought about the savings you might need to pay for future care fees? If you already have a financial plan, is it on track to meet your needs, should you need care in later life? Let’s explore this difficult topic in more detail, including ways to protect your legacy for the next generation.
The true cost of care
“£34,944 – average annual cost of a care home in 2019-2020”
(Which?)
A little forward planning goes a long way when you’re thinking about care fees. Nowadays, people typically retire in their mid-sixties, but could easily live well into their 90s. So, you need to make sure you have the funds available to pay for any care needs in later life. If you do find that you need care, your finances will be means tested by the local authority. They will assess whether you have the funds available to pay for your care.
At the time of writing, if you have assets higher than £23,250, you will have to self-fund. This applies to both care services provided to you at home and a residential care home. There is a lower threshold of £14,250, which means that if your assets fall below this, you can claim the maximum financial support. In between the lower and higher threshold, you will be eligible for some financial support.
In some cases, you can arrange for a top-up to fund your care home fees. This is an additional payment to make up the difference between the amount the council will pay and the cost of your preferred care home. This request must come from the local authority and the top-up must be paid by someone else like a friend or family member. You cannot pay your own top-ups.
Care at home and adaptations
“£15,644+ – minimum yearly cost for 2 hours of care per day”
(Which?)
Often, people adapt their property to allow them to continue living at home. They can then receive care in their own homes, which is a lot cheaper than residential care. Some modifications are not means tested and are free from your local authority, so it’s always worth checking to see what’s available.
Here are some examples of typical home modifications:
- Installing a stair lift
- Fitting a grab rail outside your front door or in the shower
- Converting a bathroom into a wet room
- Raising the height of the toilet seat
Downsizing can help to free up more funds to pay for care in later life. This can be a practical solution if you are concerned about how you will manage the upkeep of a larger property. You could consider equity release, which is a type of loan, but this can be risky as it requires borrowing money against the value of your home. Always talk to your financial planner before proceeding with any type of equity release or lifetime mortgage.
How can I avoid paying care fees?
“£800-£1,400 – typical weekly cost of live-in care”
(Which?)
Firstly, let’s make this clear – if you deliberately act in a way to avoid care home fees, this could be seen as a “deliberate deprivation of assets”. Some people consider making large gifts or transferring ownership of their home to qualify for local authority funding. But such actions will have consequences, as there are strict rules around home ownership and gifting. A local authority will look at your motive and whether you were aware of care needs at that time.
You could look at moving money into a Lifetime trust. This allows you to transfer assets into an account while you’re alive and would then be managed by your chosen trustees. However, it’s worth noting there are no guarantees this will reduce the capital to be assessed for care fees by a local authority. Depending on the timing, this could be considered as a deliberate deprivation of assets – for advice, speak to our financial planners.
A financial plan for later life
Having to pay out for care fees in your later life can leave a big dent in your savings pot. There are ways to protect your money and make it work harder for you. Work out how much money you will need by creating a timeline for your retirement income. You will need to think about when you are likely to retire and what you will want to do after you have retired. Consider your current health and whether your needs might change as you get older.
Our financial planners will talk through your plans and we’ll answer any questions. We’ll then arrange an in-depth discovery chat to find out about your current situation, what you need advice on and any future aims. Once we’ve learned about your aspirations, we’ll prepare a written proposal with some recommendations. We’ll then help you create a financial plan.
Our financial planning team can help you make the most of your savings, investments and pensions. Working closely with you, we will create a financial plan aimed at achieving a better standard of living for you today and in the future. We will look at ways of creating a financial buffer, so if you need to pay for care in later life, you’ll have funds available.
Do you need a financial plan to help you prepare for later life care? Get in touch to speak to our financial planners.
