80% of us will need some care by the time we reach our 80s and yet only 1 in 10 over 45s have set anything aside to pay for the potential care costs. Bearing in mind that care costs can be up to £40,000 per year it would seem sensible to plan ahead and avoid emotional stress in the future by putting a financial plan in place. The care payment system is complex so it is important to understand and prepare in advance.
As we get older many of us will need some level of care due to illness or old age. The level of care we need is usually decided by a local authority needs assessment. Following this needs assessment, a means test is carried out to establish whether or not we will be required to pay the costs of this care, whether a home help or a residential home ourselves. Our care needs may be fairly minor, requiring somebody to come into our homes to help with household duties or we may need round the clock care in a residential setting, or live in care in our own homes. Whatever the level of need, it will be costly so here are a few ideas to help you plan ahead for the future:
? Put aside savings on a regular basis into a tax free ISA to allow a lump sum to build up over the years, which can then be put towards care costs in the future.
? You can choose to take out a Whole of Life policy with a care clause. This may not yield as much as your savings would in an ISA, but the benefit is that it is not subject to inheritance tax if the money is not actually needed for care. This means it can be passed on to your beneficiaries without penalty.
? Certain Whole of Life policies enable you to access a percentage of your death benefit upfront if you are diagnosed with an illness such as dementia. If you become very frail and unable to complete day to day tasks, you may be able to receive the whole lump sum which was due on death to pay for care costs if you choose so to do so, although this is not compulsory.
? You may be able to release cash from your pension fund.
? Although it is hard to qualify and is subject to rigorous testing, the NHS may pay your care costs via the ‘continuous care scheme’ if you have serious and complex health needs. Many people are unaware of this scheme but it is worth investigating.
? Deferred payment schemes mean that the local authority may allow your care home fees to be secured on the value of your home. This local authority loan would not need to be paid back until your house was sold or you pass away.
? If you have paid off your mortgage, equity release means you can take out a loan secured on your home but be aware of the size of debt that can build up on this. It does however mean that you can access money without needing to sell your home, or move out - perfect if you are looking at live in care .
Preparing for later life is not as complicated as it seems, and whether you opt for a home help , or a residential care home, it is well worth the small hassle now to be ready for later on.