Funding for Care Home Costs

How we helped and advised a client and his family to cover the cost of care, while protecting as many of the assets as possible.
Aug 03, 2021 by Panoramic Wealth

Client background

JB was an 84-year-old widower who had been a client for a number of years. Unfortunately, he was suffering from Dementia, which was getting worse and causing increasing anxiety for his daughter and the rest of his family.

After 18 months of receiving care in his own home, it was decided that JB needed 24-hour support, and he went to live in a care home local to his family. He did not have enough income, however, to meet the fees and his daughter was concerned that he would eventually run out of money.

The financial position

  • Property: £325,000 (a bungalow which could be rented out)
  • Cash in bank: £110,000
  • Other investments: ISAs, Shares £200,000
  • Cost of chosen care home: £4,127 pm
  • Current Pension & Investment income: £2,854 pm

Objectives and considerations

When JB lost capacity, JB’s daughter, wanted to ensure that he was comfortable, and that his care fees were not only covered, but that she and her family had the peace of mind of knowing that the money wouldn’t run out if he was to live longer than expected. She was also keen that the property would not have to be sold to pay the fees, but instead could be rented out and the income used in its place.

Fortunately, five years previously, after his wife had died, we had worked with JB and his daughter to ensure that his Will was up to date and that appropriate Lasting Powers of Attorney were in place.

Our recommendation

After discussing the financial position and objectives with his daughter, who was now acting as JB’s Power of Attorney, we recommended the purchase of a Long Term Care Annuity to provide a guaranteed monthly amount to cover part of the income shortfall.

The annuity was paid tax free directly to the Care home. The purchase price was £50,000 and provided an initial monthly sum of £894.66 (21.4%), increasing with inflation.

The remaining investments and cash were anticipated to be able to provide enough income to cover the shortfall of £379 pm and any other incidental living expenses. If the property could be rented out as planned, the additional income would alone cover the shortfall.

Outcome

JB sadly died after being in the care home for 27 months.

We provided support to his daughter through this emotional period, communicating with the relevant people and ensuring that the estate was distributed to her, and his grandchildren in line with the Will. We also made sure that Inheritance Tax (IHT) was minimised by making best use of his allowances.

On death the income payments from the annuity ceased, total investments and cash had a value of £295,000 and the property had been retained to be included in estate.

Intergenerational planning approach

The recommendation combined different solutions, which benefited JB, his daughter and his grandchildren:

  • The Power of Attorney in place ahead of time meant that JB’s daughter could make decisions on her father’s behalf without having to go through the courts at the most stressful of times.
  • The Long Term Care Annuity gave his daughter and other family members the peace of mind of knowing that the care home fees would be covered all the while he lived and needed care.
  • Renting the property out provided the necessary additional income and meant the property remained in the estate.
  • Other investments and cash were substantially protected.
  • There was a substantial inheritance on JB’s passing meaning funds were available, which not only helped his daughter, but also gave his grandchildren deposits to buy their own homes This is exactly as JB would have wanted.
  • We are now advising JB's daughter on the reinvestment of the money.

Here at Panoramic Wealth, we can help with all aspects of later life planning, from the creation of Wills and Powers of Attorney, to advising on how to fund the cost of care for loved ones, and then, ultimately, planning for estate and Inheritance Tax considerations after death.

Contact us below today for more information.

Contact us today and let us help with your financial journey

If you prefer to call us, please dial 01892 559555 or if you wish, email: journey@panoramicwealth.co.uk with your enquiry.