Lowes Magazine Issue 120

LONG TERM CARE

Help with Long Term Care costs

REVENUE RECEIVED BY THE GOVERNMENT FROM THE recently announced increase in National Insurance contributions under the new ‘Health and Social Care Levy’ is to be split two ways: a proportion will go to the NHS and the remainder (estimated at £5.2 billion) will be used to help fund social care. This move ends the more-than-a-decade long wait for the Government to clarify the costs that individuals will need to meet for their social care in their lifetime. But, a solid financial planning strategy will still be needed. Further details are awaited on the new arrangements but for those in England it includes a cap of £86,000 on contributions towards ‘personal’ care. However, room and board, if in residential care, will still need to be met by the individual. In addition, from October 2023, the new threshold for the amount of assets a person has before they have to fully fund their own care will be set at £100,000. It is currently £23,250. Those with assets of less than £20,000 will not have to pay anything for their care, while those with assets of between £20,000 and £100,000 will be means tested. The cap will limit people’s exposure to the horrendous costs that can be involved in long term care. It may also encourage more insurers to enter the market. But individuals are likely to pay out more than the headline £86,000, due to the accommodation and food costs that are not covered. This means there is much more to anticipating and planning for the potential need for social/long term care. This could include the best approach to planning for ‘normal’ retirement, while factoring in scenarios where care costs might need to be paid. In this respect we would look at utilising pensions, investments, housing wealth and other assets. The financial plan should also be reviewed periodically throughout retirement. Individuals will also have different levels of financial need. It is reasonable to assume that those who have the means to do so may wish to have some control over their choice of care – including type, location and quality. It makes sense to set some money aside for additional costs.

Lasting Power of Attorney Lowes Consultant Chris Milsom says: Those planning for possible future care should consider putting in place a Lasting Power of Attorney so if they are unable to make sound financial decisions, a trusted individual or individuals can do so on their behalf. The process does not need to be particularly time-consuming nor complicated, and taken early can save a lot of heartache. Lowes Consultants have years of experience of dealing with social care planning, setting up trusts and facilitating Lasting Powers of Attorney. If you would like to talk with a Consultant or know someone else who might benefit from doing so please call 0191 281 8811, for an appointment. Balanced against the need to provide for future care costs is the question of what happens if it is not needed? This is where a careful assessment of the value of an individual’s estate – both today and its predicted value in the coming decades – is necessary. Where the total estate exceeds the IHT threshold and money is not needed for care, a significant proportion could be lost to IHT rather than being passed on to family members. In this situation a trust can be used to keep money outside the estate for IHT purposes after seven years, or by regular payments which will fall outside the estate immediately, but also enable the individual to draw payments from the trust if needed to fund care. If not needed, the assets can be passed to beneficiaries. When a person starts to need care, it can be an incredibly difficult time for them and their family. Having open conversations about the issue earlier rather than later, and before a crisis hits, while it cannot solve all issues can at least save families from some of the financial pressures at an otherwise very stressful time.

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