The first time most people think about funding long term care is when they or someone they love needs it. Care can be given at home or in a care home, but either way, it has to be paid for. Sometimes the NHS will contribute for someone with a chronic illness, but normally it is for the individual to fund themselves. The cost of this can be a harsh realisation at the time. Local authorities have a duty to help fund anyone who has very little wealth, however in most cases wealth includes their property which means virtually all home owners must pay.
Most care fees “planning” currently seems to revolve around trying to hide your assets from the local authority using trusts. Most times this will be “deliberate deprivation” and ineffective as customers of one local “specialist” are learning to their peril.
The best way to plan for these costs is years in advance of needing care, in practice very few people actually do so. The Government have recently suggested introducing a Care ISA that means you could save up for care fees without worrying about your executors having to pay inheritance tax on the money if you die before you need care at all. I don’t believe a lack of appropriate savings vehicles is the reason people don’t save for long term care. It’s that they are reluctant to put aside a large sum of money for something that hopefully and probably won’t happen.
In any other situation for something so potentially financially disastrous, insurance would be the solution, with the pooling of risk meaning no one individual must bear the entire cost. However, currently there are no insurance products for those who may need care. One of the major reasons for this is the open-ended liability that insurers are taking on, in the absence of a cap. In 2011 the Commission on Funding of Care and Support recommended a cap but we seem no closer to one being introduced.
Until such times as a cap and appropriate insurance solutions are in place it’s going to be a case of maximising the return on your assets. It’s a complex area and advice from a member of the Society of Later Life Advisers is likely to be invaluable.