Care home costs: Essential tips for home care funding

Posted on: 15 June 2010 by Mark O'haire

The issue of long-term care costs is never far from the headlines. Our guide highlights 10 points to consider if you or a family member face the prospect of moving into a care home.

elder careThe prospect of moving into residential care or having a carer in our home is something we'd all prefer to ignore for as long as possible.

But with National Dementia Week highlighting the problems of old age during 4 July – 10 July, with the help of chartered financial planner Ruth Dolan, we guide you through your options which may help tackle the challenges ahead.

Ruth, a member of the care sector team at leading regional law firm Furley Page, says: "The first thing to remember is that your local authority should provide an assessment of your needs so that the most appropriate type of care can be arranged for you. Depending on your means, you may find you have to contribute some or all of the care costs. If that’s the case make sure you are aware of all your options."

Ruth’s check list includes:

  • State benefits: claim all the benefits available including Attendance Allowance, which is non-means tested and paid free of tax for over 65s, and welfare benefits which change continually
  • Investments: these should be reviewed regularly. Check on the type of returns (income or capital growth); the risk involved and the tax liabilities
  • Annuities: if your income won’t meet your care home costs you may need to invest to provide additional income. An annuity with a lump sum is an option
  • Property: if you don’t want to sell your home to fund your care home costs you could apply to your local authority for a deferred payment scheme. Other options are renting your property or releasing some equity - but seek advice on the various schemes as they can have significant implications.

1) Pay for care in your home

Increasing the level of care at home can delay the need to go into a nursing home. You can expect to pay about £10 an hour to have a qualified carer – provided by your local social services department - come to your home to help with tasks such as preparing meals or dressing and undressing. It is also possible to have a carer stay overnight or even to arrange full-time care at home. Before you receive this service, your level of need will have to be assessed.

You may also be entitled to 'direct payments'. These are local council payments for anyone who has been assessed as needing help from social services and who would like to buy in services privately. The cost of care at home can also be offset by claiming Attendance Allowance (see below).

2) Claim your allowances

Attendance Allowance is a tax-free benefit for people aged 65 or over who need help with personal care because they are physically or mentally impaired. There are two rates: £47.10 for help during the day or during the night (but not both) and £70.35 for help during both the day and night. There is also a 'low' rate of £18.65. It is paid regardless of your level of income or savings. Claim by calling the official Benefit Enquiry Line 0800 882 200 or online at www.dwp.gov.uk/eservice.

3) Speak to the charity professionals

Age UK's telephone advice service provides welfare rights advice for older people and their carers, call 0800 169 6565. Events that lead up to the need for a family member to go into long-term care are often very stressful. The Alzheimer's Society is a valuable source of help and advice about dementia in all its forms. Call 0845 300 0336 or log on to www.alzheimers.org.uk.

4) Buy an 'instant annuity'

Some or all of the cost of full-time care may be financed by buying a type of annuity known as an immediate needs care plan. These pay much more than a standard annuity because typically people go into care when their health is poor and life expectancy is comparatively short. Only a handful of companies offer these plans at present and their rates vary. It is advisable to speak to an IFA before signing up for one of these plans.

5) Keep your savings separate

Local authorities no longer have the right to raid the savings of the husband or wife of someone who has to go into care and has asked for help paying the fees. However, to be sure of avoiding problems with joint accounts, married couples should keep their savings in separate names.

6) Ask for regular reviews

Many of those going into a home will be eligible for a Government payment to cover the nursing element of their care, known as the NHS nursing contribution. There are three levels - low £40 a week, moderate £83 a week, and high £133 a week. With time, the extent of nursing care required may increase, so be sure to ask for a review if you think this is the case. See the Department of Health website for more details.

7) Consider equity release

An alternative to an immediate needs care plan (see above) may be equity release. This can provide you with a lump sum or a regular monthly income by signing away some or all the value of your home.

8) Take power of attorney now

Don't wait until a family member or relative is incapable of managing their own affairs before considering power of attorney. It can make the whole process much more complicated and you may end up with the Court of Protection looking over your shoulder.

9) Beware if you want to avoid paying

Many people believe the state should pay for long-term care and some will be tempted to arrange their affairs so that they can claim they do not have enough money or assets (such as their home) to cover the cost. The authorities will come after you and your family members if they have reason to think you have deliberately set out to evade self-funding.

10) Think about inheritance tax

Legitimate IHT planning may enable you to hand some of your assets to family and friends without falling foul of the rules on disposal of assets.

For more information, please visit www.furleypage.co.uk.

Do you have any tips for care home funding?

Let us know by leaving a comment in the box below, or share your thoughts in the 50connect forums.

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