Meeting the cost of Long Term Care
Should you or a relative require some of long term care it is vital that you take advice in order to ascertain what entitlement you might have to local authority/NHS funding. Although social security benefits are the same throughout the UK, benefits need to be claimed, and in the past there have been many instances of care costs being met by the individual when they should have been paid by the local authority. Also additional services provided vary by local authority.
Having established the extent of any entitlement to local authority funding it is important to consider how any shortfall will be met. If you have savings and investments in excess of £23,000 then you will normally be expected to meet your own care costs in full (except where there is an element of nursing care required). If you own your own house and this is not also inhabited by a dependent relative of partner then this too will be assessed.
If you are required to pay for your own costs there are two main options. The first is simply to use capital to supplement any pension income you may have. If this is done consideration needs to be given to the tax position and risk profile of any savings and investments.
The second option would be to use capital to buy an immediate care annuity. For a one off capital outlay an immediate care annuity will pay care costs direct to the care provider. There is not tax liability on these payments. The cost of the annuity will be established following medical underwriting and of course if care is required for a prolonged period could offer good value. Conversely if care is only required for a short period it could prove to be an expensive option. The attraction of this option though is the certainty that it provides. Assuming that care costs do not increase faster than anticipated, you have the benefit of knowing that the cost of care can be met for as long as it needs to be. This can provide the necessary certainty to allow other planning to be undertaken; for example Inheritance Tax Planning The other advantage is that the one off cost represents an immediate reduction in the value of the estate and therefore if the estate is potentially liable to Inheritance Tax the net cost is reduced.
