long term care guide
DESCRIPTION
A Guide For Long Term Care Created By Beacon Wealth Management LtdTRANSCRIPT
Long Term Care
The content in this publication is for general information and use only and is not intended to address your particular
requirements. They should not be relied upon in their entirety and shall not be deemed to be, or constitute, advice. Although
endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is
accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act
upon the information without receiving appropriate professional advice through examination of their particular situation. We
cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles. Mortgages are not
regulated by the Financial Conduct Authority (FCA). Your home maybe repossessed if you do not keep up repayments on your
mortgage. The value of your investments can go down as well as up.
Welcome to… Long Term
Care
Whether it is for you or a loved one Long Term Care can affect anyone, and planning is a crucial part of tackling this hurdle. Advice and support is important at this stage, and should be sought out to help guide you through the process more smoothly. If you have the correct support in place it can make the transition a lot easier. Long Term Care comes under a range of different definitions; it could mean care within your home via a nurse/carer, moving into a residential apartment whilst keeping your independence or moving into a care home. These services need to be paid for via Government funded schemes, self-funding or a combination of both. You need to research your options in order to give you some idea of what these services will cost. This is where professional help may be required. It may seem that there are an overwhelming amount of
options for funding Long Term Care. This brochure will help
guide you through specialised areas of Long Term Care.
There is a wealth of further information available that deals with
many different topics highlighted here. (You can find this
information on our website; www.beaconwealthmanagement.co.uk)
If you would like a complimentary first meeting, with one of our advisers, you can
find their details on page 8 or contact the office direct:
T: 01480 869466 | E: [email protected]
Contents
Funding Long Term Care:
1. Local Authority and NHS Funding
Types of Self-Funding
2. Immediate Care Fee Payment
Plans
3. Investment Bonds
4. Tax Efficiency
5. Estate Preservation
6. Equity Release
Types of Equity Release
7. Lifetime Mortgages
8. Downsizing
9. Other Options
10. Emergency Funding and
Insurance
11. 6 Steps in arranging Long Term
Care
12. About Us
13. Meet The Team
Contact us
Beacon Wealth Management Ltd
Funding Long Term Care
Your circumstances will affect how you
fund your Long Term Care, if or when
you need it, and there are a variety of
options from self to part funded.
How much you have to pay will
ultimately be down to your health,
mobility, and how long care is needed.
Planning
It is always a good idea to set out a plan
for your needs and expectations. If you
know what sort of Long Term Care is
required, do some research and find
out rough costs in order to make a
budget plan.
NHS Funding
There may be some form of outside
funding available, for example, the NHS
continuing care scheme offers free
continuing care, funded solely by the
NHS wherever you need it, at home or
in the hospital. However, you must
satisfy the criteria set out by the NHS,
which usually means that you need a
nurse rather than a carer.
Local Authority Funding
Your local authority have a responsibility
to fund or provide Long Term Care. They
may be able to help you with the costs
of residential care or help you to adapt
your home so you can remain there for
longer. This form of funding is tested by
a financial assessment.
Benefits
It is important to claim any benefits you
may be entitled to, information can be
found via your local Government
authority.
However, even if you do qualify for any
of these schemes, it may not be enough
to cover your expectations within Long
Term Care. This is why it is paramount
that you start thinking about self-
funding early.
If you have a plan in place it will be
much easier to carry out when the time
comes. We will lay out some of the key
areas of self-funding within Long Term
Care to help guide you through the
process.
Local Authority and NHS Funding
Beacon Wealth Management Ltd
Immediate Need Care Fee Payment Plans
An Immediate Need Care Fee payment plan is
a type of annuity contract. An annuity is a
form of insurance that provides a constant
income in exchange for an upfront lump sum
investment. This will guarantee an income for
life to fund your care.
The plan will aim to cover the shortfall
between your expected income and the care
costs you incur for the rest of your life. The
price of the plan will depend on a variety of
factors:
Your age
State of your health
The level of income you need
Your life expectancy.
Criteria
This plan is only suitable if you are already in a
care home, about to move into one or you are
receiving care at home and it needs to be
funded immediately over a period of time.
Capping Costs
Capping the cost of your care will hopefully
safeguard your remaining capital. Certain
clauses can be put in place if you die early,
meaning your beneficiaries could get some of
the payments back, however, this will depend
on individual providers.
This type of plan would not be suitable if you do not
need to pay for care immediately or the care is only for
a short period of time. Make sure you check if you
qualify for NHS funding, as self-funding could be a
waste, instead your money could be used within more
valuable investments.
Immediate Need Care Fee payment plans are like a
balancing act. You need to fund care immediately and
will have secure regular income to fund your care, but
once you have taken out the policy there is no turning
back. If you die earlier than expected the money
invested is difficult to claim back.
Advantages:
Aims to cover the shortfall between expected income and
the care costs you may incur
Suitable if you are already in a home or about to move
into one
Options to safeguard capital
Disadvantages:
Unsuitable if you do not need to pay for care immediately
Not suitable if you qualify for NHS funding
Clauses can prevent you from leaving the plan early
You can lose your money if you die earlier than expected
Types of Self-Funding
Beacon Wealth Management Ltd
Investment Bonds are a way to gain regular
returns from the money you have invested.
They can ultimately offer higher returns than
from other payment plans due to the nature of
the fluctuating markets. However, this will
mean they are more vulnerable to the
changeable markets.
An Investment Bond is similar to an Immediate
Care Fee payment plan in that it is invested in
a life insurance company, but that is where the
similarities end.
With this type of investment, the company will
invest the money for you in a variety of
different funds, until you either cash it in or
die.
As this money is invested in life insurance, you
should receive some cover within the policy,
and on death it may pay out slightly more than
the value of the fund. Be aware, the fund is still
vulnerable to fluctuations in the market.
Investment Bonds are ideally used for medium
to long term investments and, therefore, you
may not be able to access your money for the
duration of the investment.
Note: Relying solely on these fluctuating
investments to fund your Long Term Care may
not match your attitude for risk. For this reason
they are not recommended for everyone.
Investment Bonds
Advantages:
The return on your investment can
be higher than a cash savings
account
In some cases the fund value might
be disregarded in a financial
assessment
If you only use the returns and
keep hold of your capital, the
investment bonds should produce
the money needed to fund your
care and be able to pass down a
lump sum to your beneficiaries
Providers will allow you to
withdraw up to 5% of the original
investment each year without
penalties (check this with your
provider first)
Disadvantages:
You will need to tie up your money
for at least five years; penalties
could be introduced if you cash the
bond in early
No guarantee that the returns will
cover the cost of your care
Extra charges may apply
Types of Self-Funding
Beacon Wealth Management Ltd
There are two key areas of taxation
that need to be considered when
planning Long Term Care:
Tax position of the patient
The implications of Inheritance
Tax (IHT)
There are many complex areas of
taxation and how much you pay will
depend on your estate, which could
include properties, assets and income.
If one of the partners is in care or about
to move into a care home, then this will
need to be funded. You must consider
what happens if the other partner
needs care later on in life; funds need
to be set in place for both parties.
Tax efficiency can affect how much
money is left over for the other
partner, it is crucial to have a plan laid
out as to how the care will be funded.
Gifting money or assets
This involves ‘gifting’ sums of money or
property to friends or relatives. Gifting
money should be handled delicately as
it could cause undue stress amongst
the receiving party. Therefore,
involving a third party who is qualified
and can give professional advice is
important.
Tax Efficiency
Tax liability
Most pension income is potentially
taxable after personal allowances have
been considered. However, income
from other sources might be more or
less tax efficient. For example,
investments can have the potential to
deliver a tax free or tax deferred
income.
Some investments can take advantage
of the annual Capital Gains Tax
allowance. Other investments can roll
over gains or are exempt from IHT after
a defined period of time.
Inheritance Tax (IHT)
There are ways of effectively using IHT
allowances more than once. The last
survivor of a relationship may be able to
use two IHT allowances and enable
assets to pass to future generations tax
efficiently.
Due to the complex nature of taxation,
it is a good idea to seek Independent
Financial Advice to make sure you are
getting the full picture when it comes to
tax efficiency and Long Term Care.
Beacon Wealth Management Ltd
An ‘estate’ is broadly defined as a
person’s money, possessions and
property. On death the estate would be
added up and divided as per the person’s
wishes.
If an individual requires Long Term Care,
the cost can decimate the value of an
estate, especially if care has been
delivered for a long time.
An individual needing care might wish to
pass their estate on to the next
generation. It would be disappointing to
find the majority of the estate had gone
into care fees after a lifetime of
accumulating a significant legacy.
Consider the impact this might have on a
surviving spouse or partner who might
require help themselves at a later time.
Planning for the possibility of Long Term
Care at an early stage is a powerful
strategy for ensuring your estate is
distributed according to your own wishes,
rather than someone else’s.
Frequently, advance planning has not
occurred, this can lead to whole estates
being used up for just one person’s care,
leaving a surviving spouse or partner with
no means to manage their own care.
Estate Preservation
Beacon Wealth Management Ltd
Equity release schemes are for people who have
nearly or completely paid off their mortgage.
These schemes are not always considered the
best option, but are more of a last resort. If you
have no plan in place equity release can be a
viable option.
Equity release explained
It is a form of benefiting from the value of your
home and gaining access to some of the money
tied up in it, whilst still living in the house itself.
These types of schemes do not exclusively have
to be used to fund Long Term Care, but due to
the fact that it allows you to have access to one
lump sum, it is often used for this purpose.
How do they work?
As with most schemes there are different options
to suit your criteria, for example, downsizing and
lifetime mortgages (explained further within this
brochure.)
Planning
Alternatively, you may wish to remain in your
home for as long as possible, add this to your plan
and figure out whether you will need to downsize
or implement some form of equity release to
adapt your current home.
Equity Release
Advantages:
Provides a guaranteed monthly
income or large lump sum (used
for any purpose)
Equity-release schemes can help
reduce your estates vulnerability
to Inheritance Tax (IHT)
You can remain living in your
home
The equity released on your main
property is tax-free
The loan is usually repaid on death
or sale of property
Any money left over from the sale
of the property can be passed to
your beneficiaries
Disadvantages:
Inflexible to a change in
circumstances (need providers
permission for someone else to
move in, or selling up early can
incur a loss on the estate)
Extra fees will usually need to be
paid
It is your responsibility to keep
your home in good condition. You
must set aside money for
maintenance costs.
You will be required to have
buildings insurance
Beacon Wealth Management Ltd
Lifetime Mortgages
Lifetime mortgages are ideal if you want to
release money tied up in your home whilst
remaining in the property. With any mortgage
there is a capital amount, and the interest on
that amount will need to be paid.
Lifetime mortgages are different to regular
mortgages. You do not have to make any
monthly repayments depending on your
circumstances.
How much equity is released depends on: your
age, how much of your mortgage is paid off and
what your property is currently worth.
Many schemes include a guarantee that the
amount owed will never exceed the property
value.
Fee Breakdown for Lifetime Mortgages:
- An arrangement fee- allocated to the
mortgage lender
- Early repayment charges- if you end up
having to repay the loan before you die
or move into a care home
- Buildings insurance- this is a
requirement when you invest in a
lifetime mortgage
- Legal fees- you will generally
accumulate legal fees with any
mortgages
- Valuation fees- for the provider to have
an idea of what the estate is worth an
evaluation will need to be completed
There are three different lifetime mortgage
options:
Interest-paying mortgage:
You make repayments on some or all
of the interest on the loan monthly
Upon selling your home the amount
you originally borrowed is repaid
You have the option of a fixed or
variable rate of interest (variable rates
will fluctuate)
Fixed-Repayment lifetime mortgage:
Interest is added to the loan
A repayment amount is agreed in
advance (that is higher than the loan)
You have to pay the provider the
higher amount when your home is
sold (works well if you live longer than
expected, but not so well if you have to
sell your home earlier)
Roll- up mortgage:
Interest is added to the loan
You do not make any regular
payments
The original amount borrowed plus
the ‘rolled-up’ interest will be repaid
when the home is eventually sold
The amount of interest you owe will
grow and, therefore, the total to be
paid back will accumulate quickly, as
no repayments are being made
throughout the term
Types of Equity Release
Beacon Wealth Management Ltd
Downsizing
Downsizing is another way of gaining money
from your property to fund Long Term Care.
This is where you sell your existing home
and invest in a less expensive home instead,
to free up some money.
Downsizing has a lot of benefits compared
to other forms of funding, and can be more
cost effective than other equity release
options in the long term. It is also a great
way of having something to pass on to your
family.
This can be used in conjunction with a care
fee payment plan, as the lump sum you pay
can be generated by downsizing.
Downsizing has extra benefits that you
might not have considered. A smaller home
such as a bungalow or flat may be easier to
maintain and adapt to your needs, providing
you with the opportunity to stay in your
home for longer.
Always make sure you have calculated all of
your costs and expenditure, so you know
that downsizing is not putting you in a worse
position with moving fees and
adapting/renovating your new home.
Advantages:
Remaining in your own home
Adapt your home to your specific needs
Potential to have a large lump sum at
the end
May be more cost effective than other
equity release options
Disadvantages:
May incur costly moving fees
Your home may not be suitable to adapt
Could cause undue stress whilst moving
home
Types of Equity Release
Beacon Wealth Management Ltd
Other Options
Money Has Run Out
If your fund has run out and you are still
in need of care, there are a few things
you can do:
1. Arrange for a care assessment-
This will update your circumstances
from your last review and you may
now be eligible for local authority
support. Alternatively, your
situation may have worsened and
you may now need to move into a
care home. Either way the funding
will need to be amended.
2. Arrange for a financial assessment-
This estimates whether you qualify
for funding and will take into
account your savings, income and
how much assets are worth.
Beacon Wealth Management Ltd
Claiming On Insurance To Cover The Costs Of
Care
You may be able to claim on an existing insurance
policy, which will help towards the cost of care.
Often people have forgotten about these policies.
Such policies could include:
Life insurance with critical illness cover
A standalone critical illness policy
Over 50’s plan
Income protection cover
Joint policy taken out with your spouse or
partner
Cover taken out on your behalf by a
current or former employer
If you are unsure of whether you have any of
these policies, it is a good idea to seek
Independent Financial Advice where you will be
able to find out what policies are still held in your
name or on your behalf.
Emergency Funding
As a last resort, if the need to fund care is
suddenly forced upon you, some local
authorities may help with the first twelve weeks
of care home fees. This can only happen if:
You own your home (which you are
leaving empty)
Your capital comes to less than the
capital threshold for Long Term Care
Your income does not meet the care
home fees
Depending on your circumstances the Local
Authority may disregard your property for up to
twelve weeks in respect of the financial
assessment that will be completed.
Beacon Wealth Management Ltd
Emergency Funding
and Insurance
1. Inform A Relative-
Inform a relative or close friend that you are considering Long Term
Care. Hopefully they will be able to support you through this process.
2. Seek Advice-
Ideally from an Independent Financial Adviser who has access to
whole market knowledge and can give the best advice for your
circumstances.
Look out for specific organisations that deal with Long Term Care
issues, SOLLA (Society of Later Life Advisers) being one of them. They
accredit Financial Advisers with qualifications to advise on specific
issues within Long Term Care, at Beacon Wealth Management we
currently have two SOLLA accredited advisers (details found on page
13).
3. Have Your Health and Social Needs Assessed-
Your GP can refer you for health reasons; everyone is entitled to an
assessment regardless of financial status.
4. Funding-
Make sure at this stage you have funding in place to allow you to
move to the next step in processing your Long Term Care.
5. Remaining In Your Own Home-
From adapting your home to maintaining your social life, some grants
and funding are available to help you achieve this.
6. Implementing care-
Make sure the allocation of estates, funding and personal care plans
are in place.
6 Steps In Arranging Long Term Care:
Beacon Wealth Management Ltd
About Us
Meet The Team
Tony Larkins APFS Chartered &
Certified Financial Planner.
(Managing Director)
Specialising in personal and
corporate financial planning as well
as Pensions and Investments
Adrian Banks Dip.PFS, Cert CII (ER & MP) SOLLA & Independent Financial Adviser
Specialising in long term care and
financial planning for later life clients
Chris Wills Dip.CII Independent Financial Adviser
..
Specialising in financial planning
..
Martin Eaton BSc, CEFA, CeMAP Independent Mortgage and General
Insurance Adviser
Specialising in mortgage and general
insurance
Mark Graddage Cert PFS, Cert CII (MP) Business Support Manager
………………………….
Specialising in mortgage and general
insurance
Beacon Wealth Management Ltd
Beacon Wealth Management Ltd
voted the best independent financial
advisers of the year, in the East of
England 2013.
Beacon Wealth Management Ltd Chartered Financial Planners
The Old Chapel Thrapston Road
Kimbolton Cambridgeshire
PE28 0HW
T: 01480 869466
F: 01480 869477
www.beaconwealthmanagement.co.uk
Authorised and Regulated by Financial Conduct Authority. Registered in England and Wales No.526604