Paying care home fees
When you've got your own pension to worry about, plus rising living costs and supporting your children, then thinking ahead to how you would pay for care if your parents need it can seem like one bit of financial planning too far.
But, like many other areas of family finance, planning in advance for how to fund care if your parent, or parents, became too ill or frail to cope alone can save you money.
Here, we give an outline of the sort of issues you need to consider. For much more detailed information, visit Gransnet.com.
Who to contact when care is needed
If you're worried about your parent and think they're struggling to cope, your first ports of call for advice should be your parent's GP and their local social services.
A Lasting Power of Attorney (LPA) is a legal document that allows your parent to appoint a person to make decisions on their behalf. There are two types of LPAs, one relates to property and financial affairs, and the other to health and welfare.
It's important LPAs are anticipated and organised in advance, because if your parent loses mental capacity without one, their affairs pass into the control of the Court of Protection. You would then have to apply to the Court of Protection to obtain an order giving you control.
Not only is this expensive and time-consuming, it also means your parent loses the opportunity to choose for themselves who will manage their interests.
Arranging an LPA is straightforward and does not require professional advice unless your parent has complicated personal, property or financial affairs. The forms are free and designed to be easy to complete, but there is a fee for registering the application, (which must be done before it can be used). Visit www.direct.gov.uk for the LPA forms and fee details.
If your parent does need a solicitor's help, go to Solicitor's for the Elderly, an independent, national organisation of lawyers who provide specialist legal advice for older and vulnerable people, their families and carers.
Care costs vary region to region across the UK. For a rough guide you can use the calculator by not-for-profit company PayingForCare to get an estimate.
If your parent has assets worth more than £23,250 they will be required to fund their own care. Yes, £23,250.
As a house is an asset, its value is counted in the financial assessment (unless your other parent still lives in the property, in which case it may be disregarded), so it may need to be sold or otherwise utilised to provide cash to pay for care. To understand more go to www.payingforcare.org.
1. Selling your parent's house
Putting your parent's property up for sale and using the proceeds to fund their care has the benefit of releasing a large sum of money initially, but you will need to make sure the money from the sale lasts for as long as needed.
2. Letting your parent's house
Letting your parent's property to tenants and using all or part of the rental income to fund their care would allow your family to keep the property but would require ongoing investment and a willingness to accept the risks associated with periods of unoccupancy.
3. Equity Release Products
These financial schemes allow money to be released from a property that can then be used to pay for care or any other support that's required. This approach would allow your parent to access the capital in their property while retaining all or some of the ownership.
Equity release products work well for people who mainly need care in the home (domiciliary care), or where one spouse needs residential care but the other continues to live at home. It does, however, require ongoing investment into the property and the overall cost of the products will accrue over time. Find out more.
Your parent may wish to downsize their property to one of a lesser value. This can release a certain amount of money immediately to pay for care while allowing them to retain the property for future occupancy or for immediate rental. But again, it will require ongoing investment, possible periods of non-occupancy and the effort of moving between properties.
These are long-term care insurance plans designed to pay out for however long care is needed.
In return for paying the provider a single lump sum, your parent (or their personal representatives) will receive a guaranteed income for the rest of their life. This type of insurance removes any guesswork and ensures continued care.
Visit Gransnet.com for detailed advice on your options for paying for long-term care for elderly parents
Disclaimer: Any content in our family money section is intended as general information only. For specific advice about your personal financial situation, get advice from qualified, independent, regulated professionals.
Last updated: almost 2 years ago