Anyone faced with funding long-term health care should look beyond equity release schemes or selling their homes.
That is the message from a West Midland firm of independent financial advisers keen to show that forward planning can be the answer to the care “lottery” for many pensioners.
Whether fees are met by local authorities or families often depends on where home care residents live, says McCarthy Taylor, which has offices in Worcester and Evesham.
Although the Government has introduced means testing, inconsistencies persist and many elderly people, often with severe illnesses, end up having to pay for long-term care themselves.
And even though reforms were announced this week to the funding of social care, they will would not cover accommodation costs for those in care homes, only the care element.
Given the economic situation, health ministers also said there was no chance of a new system being phased in before 2014 at the earliest.
Clive Collins, of McCarthy Taylor, says that, as care costs soar, many people are turning to equity release or are being forced to sell their homes.
“These, however, are not the only options available and, with careful financial planning, assets can be saved to pass down to future generations,” he said.
“With annuity and interest rates falling, it’s not hard too see why further cash may be needed. An interesting fact is that the divorce rate in the over 60s has increased by around 50 per cent and releasing capital from the home could be one solution in addressing the associated costs.
“However, equity release is not necessarily the panacea for these problems. There are a number of so-called equity release plans and great care should be taken before entering into any agreement. Legal advice should be taken at all times.”
There are ways that those being assessed for long-term care fees can protect assets. “The local authority takes capital assets, such as cash savings, investments and property into consideration when assessing whether you will need to fund care yourselves,” said Mr Collins.
“They will disregard certain assets, such as personal possessions, your main residence, if your spouse lives there, and capital investment bonds. An investment bond would not be assessed for care costs, as laid down in the Charging for Residential Accommodation Guide. The use of an investment bond could be useful in helping to avoid funding residential care costs out of capital.
“We would mention that you may well find that you may not have to foot the bill at all. It may be that the NHS should be paying for your care, if you have a primary health need.
“This should be investigated, when the situation arises, as well as considering all of the state benefits that may be available to you at that time.
“It is becoming more and more important to consider the possible payment of care fees when planning your future finances.
“It is advisable to seek advice early and look at ways of protecting your investments and making sure that you receive the funding from the Government that you are entitled to for long-term care.
“Once it becomes apparent a person needs long-term care it is too late. The time to protect assets in this way is to take appropriate advice from specialists on setting up the investment.”