When families have a relative who needs care at home or long term residential care, the big question on everyone’s lips is how the fees are going to be met. With average annual fees of over 30K , the cost is beyond most people’s income and, the usual resort for funding this care is through the sale of the family home. It is at this point that the relative in care can see the home that they worked so hard to pay for having to be sold with any hopes of leaving an inheritance to their loved ones fast disappearing.
With asset limits, including a person’s home, set as low as 23K in England and Northern Ireland, 22K in Wales and 22.5K in Scotland, it means that most people will have assets above the local authority funding limits and will have to pay for their own care, unless they qualify through one of the very limited exceptions to these rules. Help is available from local charities, but their funds are limited and not to be relied on as a long term solution.
One of the most effective solutions used in care fees planning is a care fees plan also known as an Immediate needs Annuity. The cost is governed by an individual’s age, gender and medical condition, which is assessed on receipt of a medical questionnaire from the residential home and the person’s G.P.. The more ill and fragile a person is - the smaller the premium cost as, the price depends on the insurance company’s view on the individual’s expected lifespan.
Care fees policies help protect a family’s wealth because, when future costs have been assessed and catered for plus a good margin for any unexpected events, it means that the rest of the family’s wealth is there to become an inheritance for the family members left a legacy in the Will, instead of being eaten up by care home fees.
Although the lump sum premium does not qualify for tax relief, as long at the monthly payments are made directly to a registered care provider, they are paid tax free and do not affect the tax position of the person receiving the care. (To be a registered care provider, they must be registered with the Care Quality Commission).These plans are flexible as well as tax-efficient as, should the person no longer need long term care, the net payments can be paid directly to the person with tax deducted at 20% by the annuity provider. although this tax applies only to a fraction of the payments.
If there is an inheritance tax liability, the purchase of an immediate needs care annuity can also be a very tax efficient way of reducing this liability as the cost excluding any capital protection can be deducted from the estate - effectively purchasing the means to pay for the care with a forty percent discount.
Finally, it means that the following aims have been attained:-
Any remaining monies are preserved for the estate and the person receiving care can achieve their wish to leave an inheritance.
The capital amount is at its lowest when the lump sum has been paid. Once this has been done, all future costs to the amount covered by the premium paid, are covered, thus giving any monies the chance to regenerate the estate.
The capital amount is at its lowest when the lump sum has been paid. Once this has been done, all future costs to the amount covered by the premium paid, are covered, thus giving any monies the chance to regenerate the estate.
In order to achieve the above objectives, ensure that you get the correct advice from an expert financial planner who has the necessary experience in the area of long term care.
Before you implement a long term care annuity plan that can protect against huge care costs simply access your remarkable free article written by barbara Davies, CEO of equityCare