Planning for future care

Planning for future care

The longer we live, and as we all know life expectancy has increased significantly, the more the chances are that we will need some sort of care in our later years. However, what we each might, or might not need can be a complete unknown until we reach that point. Sadly though, by that stage it is often far too late to start pondering how we will pay for it. Therefore, in an ideal scenario, this needs to be given serious consideration, years, or preferably decades, beforehand.

The one certainty in all of this is that someone has to pay the cost and with increasing numbers putting demand on social care resources, the burden is going to increasingly fall on our shoulders. Moreover, a recent survey of the over 60s conducted by Opinium for Canada Life, suggested that 11% (which would equate to 1.8 million,) seriously underestimate the cost of care.

Governments have long been aware of the potential burden on the state that comes with an ageing population. The extra 1.25% on national insurance in April was brought in, in part, specifically to address the issue – with £5.4bn earmarked to fund the social care sector and charging reforms but the cost-of-living crisis has induced a reversal of the proposed rise.

In 2022, the average cost of home care is £15 an hour, and much higher in many parts of the country. Only two hours of daily home care could amount to over £10,000 a year. A live-in carer to tend to one’s needs up to 24 hours a day will cost considerably more. For residential care for a loved one, you can expect to pay between £696 and £849 a week, on average, while full-time nursing care ramps the cost up to between £969 and £1,075 a week. (According to Laing Buisson, Care Cost Benchmarks 2021.)

Under the Government’s current care proposals, the amount we will all have to pay in England is set to change. From October 2023 it could mean that no one would have to pay more than £86,000 towards care costs during their lifetime. Any additional costs would need to be met by your local authority.

As so often with proposals that sound wonderful from the headlines, the devil is in the detail and the £86,000 limit only applies to the ‘personal care’ element. This means that things like help with washing or dressing will be at a rate to be determined by each local authority. It will not include additional care costs or living costs like food, energy, or accommodation, often called the ‘hotel’ costs. After the recent mini-budget, whilst the government says the money for these changes to social care is still earmarked, (or will be found down the back of a sofa somewhere,) many are still understandably worried.

There are also proposed changes to the thresholds for local authority support from October 2023. Those with assets worth between £23,250 and £100,000 will be eligible for means-tested help toward costs. What this all means is that if you own a property and/or have savings and investments you are likely to end up outlaying £86,000-plus and that is a huge sum to take out of your pension income.

There is far more detail, and each case will be assessed on its own merits but what is certain is that an early conversation with a qualified financial planning firm like FB Wealth will be beneficial. Funding over time, similarly to building a retirement pot, will lower and spread the costs, potentially making them far more palatable and affordable.

From your perspective, the ideal time to suggest a conversation with us might be at the point a family is talking to you about powers of attorney, as they are already demonstrating they are thinking ahead. Similarly, with the shoe on the other foot and a client speaking to us about funding for care, we would be strongly recommending that an LPA be put in place.

Guidance on Deliberate Deprivation

Following on from the previous article suggesting early client conversations on future care funding, we recently noted that the Local Government and Care Ombudsman had issued new guidance to local authorities on the often-complex issues surrounding capital deprivation. For ourselves as financial planners advising clients in this specialist area of what constitutes deliberate Deprivation is essential. Particularly, as we have all read about and are aware of dubious advice and often trusts that offer clients way to circumvent the rules. Indeed, you may as solicitors have been asked to unravel bogus advice that over promised.

At present, because of the current tight budgets of all local authorities the above body has issued this fresh guidance, which although aimed at financial assessors working for them, might prove useful to us as advisers and you as lawyers. The following quote from the launch here, from which you can download the guide in PDF form highlights the issue for local authorities:

“Deprivation of capital is when someone knowingly reduces their capital for financial benefit. When councils are carrying out financial assessments to work out how much people should pay for their care, they must sometimes make very nuanced decisions about whether someone has given away money, or deprived themselves of an asset, with the intention of avoiding charges for care.”

From our standpoint at FB Wealth, it seems logical that if we wish to collaborate with solicitors and professionally advise clients in this arena, an understanding of how the local authorities are being advised to view the situation might prove useful. If you wish to discuss this or any other aspects of advanced financial planning and fund for care in later life, we would be delighted to hear from you.

Inheritance tax receipts for April to August 2022 rose 12%

In September, HMRC announced that for these 5 months, the receipts into their coffers for IHT were £2.9 billion, a large £300m increase from the same period in 2021.

Even though the threshold has been frozen for 12 years, IHT is currently still paid by one in every 25 estates. Of course, this is primarily due to ever-increasing property prices which are taking estates over the threshold, but it certainly means that IHT is no longer, as it was once considered, just a problem for the wealthy. Therefore, even safe in the knowledge that the Nil Rate Band and Residence Nil-Rate Band will remain fixed until at least 2026, many families who would not consider themselves by any means rich, could be facing IHT bills.

The new Prime Minster, Liz Truss, in her leadership campaign, pledged to review the IHT rules but in the current climate where her government is borrowing to alleviate the cost-of-living crisis and cutting other personal and corporate taxes, it is hard to envisage any majoring tinkering with this tax that is currently a much-needed cash-cow. No news was certainly good news in September’s Mini Budget.

You will undoubtedly be advising families when establishing their wills, but as financial planners, we would always incorporate tax planning and consider the vehicles and allowances available to ensure their beneficiaries do not pay any more tax than they need to. By considering tax planning strategies there are several legitimate ways families may be able to reduce or eliminate their IHT bills. Such strategies include the appropriate use of gifts to family members, using life insurance, investing tax-efficiently using legitimate Business Relief vehicles, or collaborating with you using the most appropriate, rather than off-the-shelf trust arrangements,

If you would like to discuss the strategies and vehicles FB Wealth can use to assist clients to mitigate or even wipe out IHT completely, please do not hesitate to contact us. We would also be happy to provide training on the subject, which will offer your teams relevant CPD, helping them recognise when to refer clients to us. Given the recent paper from the Legal Services Board on ‘Professional Competence’ and the subsequent SRA reminder to solicitor firms and individuals on ensuring relevant and ongoing professional development, this might well be of interest.