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Financial Planning

The Funding Your Choice section of this site covers all the aspects of State support entitlements in respect of care and home accommodation for those having limited capital assets.

If, however, you have savings or investments over £23,250 (excluding a property) you will be expected to pay for all of your care needs at home – or all of the costs of residence in a care home. There are some circumstances where the value of a former home must be ignored for the purposes of a capital ‘means test’ – such as a spouse or partner continuing to live in the property. Whatever the case, the local authority must disregard the property for 12 weeks from the start of care home admission.

 

The bitter pill to swallow

This may come as a bitter pill to swallow for those who have paid national insurance contributions throughout their working lives and have sensibly built financial assets for themselves and, subsequently, their families to enjoy.

Unfortunately, with today’s cost of private care services and care home accommodation, the notion of wealth cascading down the generations can be but a pipe dream! Indeed, many children may find themselves funding their ageing parents, rather than inheriting anything from them!

It’s a sobering thought that with care home costs amounting to as much as £33,000 a year, the value of a £100,000 property could be wiped out as a cherished family asset in little more than three years. Even if cheaper home accommodation is found, it should not be forgotten that, with today’s advances in medical science, our ageing population is living longer and longer. Many years of care may have to be funded.

It is some solace that ‘nursing care’ is now provided free but there are still serious concerns about the definition of ‘nursing care’ and about how this works out in practice. If, for example, a qualified nurse undertakes a task it is free. If a care assistant provides that same help, it is charged!

Tens of thousands of people are still forced to sell their homes each year to meet the costs of accommodation and personal care – unless other ways can be found to fund the services needed.

The government’s provision for local authorities to ‘lend’ the care costs to individuals may be one solution to the funding of preferred care services. However, the net result of such a ‘mortgage’ arrangement will still be the loss of the major part of an inheritance, when the lent amount is recouped from the eventual Estate proceeds.

Whichever way you look at it leaving a legacy may indeed be a thing of the past for many people.

 

Prudent forward planning

However, the financial impact of long term care can be softened by prudent financial planning before the need arises. Firstly, there are ways for your family to ‘ring-fence’ cherished assets completely. Alternatively, you could create an income flow which will allow you to afford the choice of care and home accommodation that you prefer, for as long as it’s needed.

Unless you are fortunate enough to have sufficient independent wealth to generate substantial investment income, it will pay you to look at the options of Long Term Care Insurance and Home Equity Release Plans, as described in this site.

We would suggest that, whichever option you consider, objective, professional advice is obtained. Age Concern, for example, can provide excellent information on these topics.

 

Lasting power of attorney

An important financial issue which may affect many elderly people and their families is the matter of lasting power of attorney.

Power of attorney itself is the formal legal instrument of appointment necessary for somebody to look after the financial affairs of another – when, for example, that person may be living abroad. Lasting power of attorney (LPA) is special, in that it remains valid after somebody has become mentally incapable of managing their own affairs. A LPA legal document can be produced only when an elderly person (the donor) is in sound mind and still capable of making decisions about the future. A prescribed form of document can be obtained from legal stationers – or a tailored document can be drawn up by a solicitor or other professional advisor.

The donor then appoints one or more people (attorneys) to manage their financial affairs and property, either now or at a future date. It is worth noting that a LPA can normally be used as soon as the document is completed. If it is intended that the power should not be used until after the donor becomes mentally incapable of managing their affairs, an appropriate restriction should be included in the document.

You should also be aware that an Attorney can have wide, unrestricted powers to run somebody’s affairs – so, as a precaution against possible misuse of Power, consideration should be given to appointing more than one attorney.

When there is reason to believe that the donor is becoming mentally incapable of managing his or her own financial affairs, the attorney(s) must apply to register the LPA with the Public Guardianship Office.

For further details about the Public Guardianship Office telephone 0845 3302963, or visit www.guardianship.gov.uk

Many children and relatives are mistaken in thinking that they will automatically be given LPA power of attorney when the parent in question is considered incapable of making decisions. In fact, if a LPA instrument is not in place those relatives would become a ‘receiver’ – overseen by the Court of Protection and its agency, the Public Trust Office.

The Court’s strict function and duty is to protect and manage the property and financial affairs of persons who are unable themselves to assume such responsibility. The process of being accepted as a receiver can be long, complicated and upsetting – even for children of an affected parent. Dealing with the Court can prove time consuming and endlessly bureaucratic.

The lesson is, that the process of a lasting power of attorney application should be started with a solicitor well before there is an apparent need for it.

We should point out that Lasting Powers of Attorney do not apply in Scotland. Scottish readers will find the Alzheimers Scotland web site to be extremely useful reference to that country’s particular welfare, benefits and legal technicalities. Go to www.alzscot.org.

 

 

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