Elderly Care Planning

As most of you will be aware the issue of your clients or even YOU having to pay care fees at some point in their lives has been a talking point for many years and  quite rightly is at the top of our adgenda because of the hardship this can bring families in trying to pay large care fee bills. Unfortunately most people tend to think ‘it will not happen to me’ and if it does then I’ll give the house to my kids, if only it was as simple as that.

Waiting until a life changing event has occurred is not an option and never has been in the past, and looking at the Dilnot report it will NOT be in the foreseeable future either!

The fact is there are a large number of Will Writers offering Estate Preservation plans at some considerable cost and many of these simply will not work, and no one knows that until it is to late.

For your information if you are speaking to a Will Writer about their proposals ask them some questions from the CRAG rules, you will soon find out how good they are.

Below is a brief breakdown in simple terms of what is PROPOSED and NOT what will necessarily take place

FAR-REACHING proposals to reform the funding of long-term care in England could see hundreds of thousands of pensioners potentially get a more generous deal from the State. Because the fees are to be potentially reduced as the report recommends that the State contributes More to payment of care fees, but whether this is possible or not is a different question?

For some, it could spell the difference between losing all their savings to care costs and having a legacy to pass onto others.

But there are big doubts over whether the nation can afford this deal.

So of the answers from the report and key questions.

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I have included a short presentation below which outlines some important points about your Care Fees planning. It won’t take long.

Send me your details via the box below and I’ll send you important information and let you know when I am next running these informal workshops. No salesman will call and your information is not shared.

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THE Commission on Funding of Care and Support, which reported last week, wants the State to shoulder a bigger share of care costs.

It proposes a lifetime cap on the amount any individual pays towards their care, either in a residential home or their own home!

This cap could be anywhere between £25,000 and £50,000, but the Commission suggests £35,000. But where the cap will really be is anybodies guess?

Once this cap has been reached, the local authority could step in and pay towards additional care.

At the same time the means test threshold, the level at which someone is judged too poor to pay anything towards care, would rise from the current £23,250 to £100,000.

But property is still available to be used to pay for care fees as is the case currently, the report also suggests that as is the case now, should one person reside in a property and majority of their wealth is in that property then any care fees can be deferred until death and therefore taken out of the value of the property at that time, so potentially put a charge on the property to ensure the state gets their money back then, therefore obviously reducing any legacy that the family would have received, NO real change there then!!

Andrew Dilnot, who chaired the Commission, says both moves are necessary otherwise poorer pensioners would still see their savings savaged by care bills. Well we think he is right, but pensioners who have worked all their lives, paid tax and NI and paid a mortgage to buy ‘their home’ to pass this on two their children will still be disadvantaged, because most people will probably have a property valued at more than £100k!

So the need for careful planning is still a must!

Care home residents would also pay an annual charge, capped at between £7,000 and £10,000 a year towards their board and lodging.Those who chose a home with better facilities and higher charges might also have to pay the difference between the local authority’s standard rate and their actual costs.

TAKE the example of someone spending the average of only four years in residential care and who has assets above the means test level. The care home costs would be £27,000 a year, the average fee, with half classed as care costs and half as everyday ‘hotel’ costs for accommodation, meals, etc. Assume these are capped at £10,000.

Over four years, the resident would pay £40,000 on ‘hotel’ costs and £35,000 for care. The local authority would pay a total of £33,000 – £19,000 towards care costs and £14,000 towards its share of ‘hotel’ fees. Under the current system the resident would pay the entire £108,000 cost, this is now reduced to £75,000.00?     But where would this to come from?

‘Please Local authority take my home to pay for my care fees, I have worked hard to pay my mortgage off and loving maintained my property, I have insured it both inside and out every year and made sure if I was off work ill, my health insurance paid my mortgage. I have diligently paid my taxes and NI and now I am expected to use my home which I would have liked to have passed to my family but I cannot do this now because I have become ill or old and need caring for.’For most it would come from their property, if of course they where in a care home for a longer period then of course the fees would rise rapidly and possibly all the value of the property could be used!

There is talk of possibly considering the opportunity for some sort of insurance cover, but how will premiums be evolved;- age, past illness, life expectancy and so on, no matter the cost of premiums they would for sure, be very costly and most people on limited pension incomes would not be able to afford them, as most clients are asset rich and cash poor, as we all know!

THE postcode lottery that currently exists where each local authority has its own system to assess care needs. The Commission wants a single, national process with standard care assessments.

THE Commission says anyone who has been in care for two years when the new rules come into force should be deemed to have already paid their share. That is great because under current rules there is very little to be done then anyway!

THIS is the tricky question. If the Government picks the Commission’s preferred options, the total cost is about £2 billion a year, rising to £3.6 billion a year by 2025. Dilnot says: ‘This represents one four hundredth of public spending. We are convinced it is absolutely necessary and a price worth paying.’ Contrary to some reports, the Commission did not call for new taxes. It says it is up to the Government to find the money, with the burden shared between those in work and those above pension age.

But others worry the Commission’s plans will be too expensive for the Government at a time when public finances are stretched.

CARE is a devolved matter so there is no guarantee that authorities in Scotland, Wales and Northern Ireland would copy the English system. There are already more generous arrangements for personal care in Scotland, for example.

THAT is up to the Government. Ministers have given the plans a cautious welcome and promised that talks will be held between all the political parties.

Health Secretary Andrew Lansley says implementing the recommendations depends on finding a fair way to fund the ‘significant’ extra cost. A White Paper is promised next spring but reforms are unlikely to come into force before 2014.

So as expected life goes on and so does this debate, in the meantime people will still need to use their homes to help pay for their care fees, and even if these new rules do come in, many, many people will still pay vast amounts towards their care fees and more people will need care because we are all living longer!        So NOTHING really changes!

So what can you do to help your clients to help themselves, well they can still complete the Property Protective Trust in their wills, cost effective and proved to work this will guarantee to save at least 50% of the property value.

Of course there are some firms out there offering to save 100% of the value of the property and offering to set these up, as I have discussed with many of you, they should be saying “possibly” after each sentence offering savings. Remember under CRAG rules a lot can and will change.

Richard Smith.