Insurance against care costs

JennyP

An elderly relative is worried about what would happen if she had to go into care and whether her life savings would be gone when she wants to leave them in her will.

We know someone else who bought an insurance policy for this scenario
It was expensive but it pays most of the costs of his care (he was already in care when he got it).

My relative is still fit and relatively healthy (touch wood) but I think if she could get a policy like that, it would give her peace of mind. I know she worries about one of her children's financial situation.

Any advice? Anyone had any experience of these policies?

Malthusian

You can buy "deferred care annuities" but they are deferred for a fixed length of time, they don't kick in whenever you happen to need care.

It would be a bad idea to take one of these out in her situation as if the deferral period ended and she still wasn't in care, the annuity would start paying out but she would lose the tax benefits. (They would become taxable as a purchased life annuity, whereas if a care annuity is paid direct to a care provider, the payments are free of tax.)

If she goes into care then her life savings will be reduced in exactly the same way as if she decided to move into an expensive penthouse in London or otherwise dramatically increased her lifestyle expenditure. All an annuity does is fix the amount that you spend. Usually it means you spend more as that's how insurance works, but a minority of people will spend less (potentially a lot less).

Maybe her child should be the one on MSE rather than your elderly relative if they have problems with their financial situation. There is no financial problem to which "inherit money from your mum that might not come for decades and may never come at all" is a great solution.

lisyloo

I looked at an immediate care need annuity recently.
My MIL is 91 and I was told that the ballpark was 3 years fees, so if we wanted £625 per week then that’s about £100k.
We didn’t go for it for a couple of reasons.
Firstly the lady is in decline and whilst we don’t know there was a consensus that she won’t live for many mor years,
The biggy though was that this didn’t guarantee to cover the care fees.
If the care fees increased beyond the annuity then there would be a shortfall, so this didn’t work for us where the risk was running out of money in a nice care home and having to go to an awful one (yes they are awful in our area we have visited).
So we didn’t take it.

A few points.
1) not everyone needs residential care. There are a variety of services people can engage to keep them in their homes. Meals on wheels will deliver hot food. Carers can visit up to 4 times a day and a variety of technology e.g. crash mats by the bedside, pull cords, pendants, movement detectors and even cctv can keep people safe. There is an issue when people lack the capacity to make safe decisions however.

2) those that need residential care don’t tend to last that long although there is a wide range. This is partly because of 1) above. Average stay is 26 months, although that can vary hugely and there are a few long stayers.

3) the person will still receive state pension, attendance allowance and funded nursing care, so as as example my MILS capital reduces at £625 instead of £925 due to income and a little less if we factor in interest from capital. So capital may not reduce as fast as people think.

4) there is a cap of £72k coming in April 2020. In practice this is around £120k as it doesn’t include board and lodging, but it’s still a cap. I think that’s quite a biggy so check it out.

Hope that helps

xylophone

there is a cap of £72k coming in April 2020. In practice this is around £120k as it doesn’t include board and lodging, but it’s still a cap. I think that’s quite a biggy so check it out.

Seems to have been ditched/ re-discussed/put in abeyance?

https://www.communitycare.co.uk/2017/12/08/plans-cap-social-care-costs-2020-pulled-government/

https://news.sky.com/story/familys-anger-as-governments-social-care-plans-delayed-for-fifth-time-11689235

lisyloo

Thanks xylophone, very useful to me.
The government are repeatedly failing to grasp this issue.

We want my MIL to have the best care possible rather than an inheritance.
Our feelings might be influenced by the fact that we did visit a number of dreadful care homes suggested for MIL and FIL in BANES (which is jacob Rees-mob territory), which we have since referred to as overmydeadbody grove as my SIL outright refused for my FIL to stay there (she would have looked after him herself if push had come to shove but it would have involved hardship for her).

My own father and step-mother have recently put their home into trust for their 5 children.
I am not sure if they’ve thought that through as again I’d rather they got comfortable care than I received 1/5th of not much.

Keep_pedalling

lisyloo wrote: »

Thanks xylophone, very useful to me.
The government are repeatedly failing to grasp this issue.

We want my MIL to have the best care possible rather than an inheritance.
Our feelings might be influenced by the fact that we did visit a number of dreadful care homes suggested for MIL and FIL in BANES (which is jacob Rees-mob territory), which we have since referred to as overmydeadbody grove as my SIL outright refused for my FIL to stay there (she would have looked after him herself if push had come to shove but it would have involved hardship for her).

My own father and step-mother have recently put their home into trust for their 5 children.
I am not sure if they’ve thought that through as again I’d rather they got comfortable care than I received 1/5th of not much.

Who convinced them to go down the trust route? Unless they are now paying their children full market rent it won’t save IHT, which leaves the sole reason for doing it the avoidance of care costs which will be treated as deliberate deprivation of assets, so won’t work.

There could well be CGT to pay when the time comes to sell the property as well.

You are quite right welfare comes before inheritance, and staying out of a over my dead body type home should be a priority.

lisyloo

No idea, but they are both mentally capable adults and very much able to make up their own minds. I would think they’d used a solicitor to set it up,

There is no issue with IHT (I’d guess value of house is £150k).

If you are right and deprivation of assets comes in play then I’m quite happy.

Not much you can do when capable adults make decisions for themselves but I will tell them when the occasion arises that I’d rather they had comfortable care.

xylophone

My own father and step-mother have recently put their home into trust for their 5 children.

The "operative purpose" being to avoid care home fees?


https://www.bbc.co.uk/news/business-39589083

Trusts
According to Bridgette Shilton, chair of the National Association of Financial Assessment Officers, if avoiding care fees is a substantial motive for putting assets into a trust, then a local authority can challenge it as "deliberate deprivation".

"If people are trying to protect their house in the avoidance of care fees then that's not allowed; that is a clear deprivation of assets. It doesn't work," Ms Shilton says.

"As soon as we find out a property has been transferred we will be looking into the motivation, we will be asking questions."

Keep_pedalling

lisyloo wrote: »

No idea, but they are both mentally capable adults and very much able to make up their own minds. I would think they’d used a solicitor to set it up,

There is no issue with IHT (I’d guess value of house is £150k).

If you are right and deprivation of assets comes in play then I’m quite happy.

Not much you can do when capable adults make decisions for themselves but I will tell them when the occasion arises that I’d rather they had comfortable care.

Unfortunately there are firms out there who prey on peoples fear of being self funded, and convince them that it is a good idea. For those companies it is a good idea because they get a big fat fee for doing it and there will be no come back on them when it all goes pear shaped years down the line.

The reality is that people should really be afraid that they can’t self fund.

lisyloo

Looks like they’ve been mis-advised.
Any suggestions on what I should do? Given

They are unlikely to accept my advice over a professional solicitor.
The statistical chances are that neither will need residential care.

I think I should do nothing except warn my siblings not to expect anything.

Nebulous2

There are different options / cost depending on age, state of health etc. They will be expensive however. Look for long-term care annuity.

Remember many people don't need care, so paying for something in advance may mean it never pays out.