Planning for the 'What-ifs' - care home fees
planning for the ‘what-ifs’ - care home fees
24 april 2020
we can’t predict the future
True planning should be about outlining scenarios that could happen rather than trying to focus solely on one that you expect to occur - as it's almost certain that things won't work out exactly how you plan.
One of the most common scenarios that arises is discussing what would happen in the event of requiring care; an increasing element of our society both in terms of frequency and cost.
The truth is, we can never and should never base all our planning around the potential need for care...because we could end up failing to enjoy what we've got, while we can.
how can we fund care fees?
There are ways to alleviate the concerns and build in "contingency plans". JJFS was built on the ethos of ‘planning for the worst and living for the best’ - hence our legacy in Life and Critical Illness insurance. Planning for a scenario where permanent care is required seems like a natural evolution. Advising on care fee funding is a complex and specialist area, one in which JJFS do not specialise but we do know advisers with the right expertise.
For those who own their home outright, one area to consider as a viable fall-back option is Equity Release. This is not the terrible idea that the media often try to make out - it is simply a mortgage that you don't pay interest on; your heirs pay it by receiving less when the family home is sold. If you're fortunate enough to have an estate large enough that will suffer Inheritance Tax, the "mortgage" could actually have less of an impact on your heirs as they would have had to pay 40% tax. That's not to say that your planning should aim to live off the equity in your later years but allowing it to be part of your contingency planning could free you up to make the most of your healthy years.
The other way, and I think this is far too unknown, is through the purchase of a medically underwritten annuity. Annuities are another financial product that have received a bad rap in recent years. The criticisms focus primarily on pension annuities and the ever-lowering rates they offer. But when it comes to financing the cost of care, the guarantee that an annuity offers can alleviate the concerns of the person requiring care and their family. In short, it provides a degree of certainty at a time when life is anything-but.
settling a loved one in a care home- first hand experience
The need to fund and settle a loved one in a care home can happen sooner than you might expect, which can be extremely daunting, as is the case for most things you do for the first time. One of our clients recently experienced this following the sudden diagnosis of his mother’s dementia. He kindly shared his journey with us; the worries he had will no doubt echo those who may find themselves in a similar position, but hopefully his story will help to alleviate some of the unknowns, and also reassure you that you’re not alone:
“I had just settled into glorious retirement - with the kids married and well set, I had taken the first of the exotic retirement holidays and felt very confident that my finances were in great shape - I could lie back and relax.
Then my widowed elderly mother is diagnosed with dementia. Alone in a big house in a small Cotswold village and visibly deteriorating I'm faced with a very challenging situation. As is often the case, the sufferer doesn't understand or accept their situation and wants to continue life as before.
Living 3 hours away from Mum limited the amount of help I could provide whilst she battled with the basics of life: “how does the central heating work?”, “How do I work the washing machine?” and “The TV won’t change channel”. Fortunately, kind neighbours helped regularly, however, we were all just papering over the gaping cracks! We know this can't go on, but Mum cannot accept the prospect of change.
At one of my regular financial planning meetings with JJFS, I was asked about the welfare of my family and Mum’s situation was discussed. Rather than simply a polite enquiry, it quickly became an action point as to how we could finance the inevitable move into a care home. They connected me with an expert in the field of Care Annuities (I had no idea such things existed). Whilst I had the difficult task of convincing mum that her life would be so much better in a care environment, I had a specialist working on my behalf to secure an excellent care annuity that guaranteed to cover the not insubstantial care fees for as long as required.
Mum has recently moved into a beautiful new care home in Sussex where she is spoilt rotten and is so happy. Needless to say it’s a huge relief for me also.”
we’re here for you
"Brian's" experience above is becoming increasingly common. We're here if you want to discuss these areas and how they could factor in as part of your long-term plan. If you are in, or approaching, a situation where you need to look at equity release and/or paying for care fees (for you or a family member), we can put you in touch with the right people to help.