Have you considered whether you or a relative may need to enter residential care or a nursing home in the future?
Most will have considered a pension for the end of their working life, but this is an additional expense that many overlook. Care home bills alone can eat up £50,000 a year and who knows how long you might need to reside there. Specialist care for dementia patients is likely to be higher.
Whether you opt for a part or full-time carer in your home or move into a specialist residence, it’s not likely to be cheap. Your local authority may be able to cover some of the costs, if you are eligible, but may limit your choices. Eligibility will be decided based on whether you have savings or property, to specific limits, as well as pension income. It also depends on the type of care required.
Gifts can be made throughout your life, in order to reduce assets, but not in lump sums to avoid paying care fees. You could fall foul of the rules if you rely on this idea.
So how do you make the most of any available investments and income? Investing for Tomorrow can help you to restructure your portfolio to generate an income stream to help cover funding gaps. You may also need to face the reality that your wealth will be spent on your future care rather than being left to your family or charity.
Power of Attorney
As you grow older, it is a good idea to prepare a power of attorney (POA) and to discuss your finances with your relatives so that they are aware of your wishes should you be unable to action them yourself. This safeguard ensures that your chosen appointee must act in your best interest, not in theirs.
It’s also important to consider all of your assets. Sites like mylostaccount can be useful in finding forgotten accounts. Property should be valued for letting purposes as well as sales. Equity release is also an option for those who are able to remain in their own home.
Unfortunately, insurance policies are no longer available to pay for care unless you already have one. Instead you can buy an Immediate Needs or Care Fees Annuity (INA) where, in exchange for a capital lump sum, the annuitant will receive a monthly payment for as long as they survive. The advantage here is that an INA will continue to pay out no matter how long you or your relative live.
If you are comfortable investing, a stock market portfolio is also a possibility to generate both an income and capital gains. However, managing a portfolio to pay care home fees could mean following a different set of rules to the ones you use to run your own portfolio due to shorter timescales. Taxes and exemptions must also be considered.
Nobody likes the idea of getting old and not being able to adequately look after themselves or their family. Taking steps now could remove added financial burdens from many already tough decisions. For example, a POA can be made online.
Do feel free to get in touch with our planners should you need more information or help with any of the above.