Paying for care: 5 step how to guide

Understanding how to find the money for very best care for your elderly loved one can feel overwhelming. Many of us think that all of the costs are covered by the state, while others fear having to sell their homes to pay for care. We have debunked the myths and collated our experience in an easy to follow 5 step guide, helping you to figure out how to pay for care.

Research the costs of care and financial assistance available

The idea that care is either free or generally taken care of by the state is common but it is simply not the case. These misleading ideas are sometimes perpetuated by articles we read in the news, government narratives and friends and family.

Before you start speaking to care providers it is helpful to have an understanding of what care typically costs and any financial assistance you may be entitled to. Some local authorities have Welfare Rights Advisers you can access, and Citizens Advice may also able to give you information, its also worth speaking to your family solicitor or a financial advisor who specialises in such matters.

In Scotland personal care (assistance with getting washed and dressed, meal preparation and medication prompting) is subsidised by the state for everyone over 65 who has been assessed by the local authority as requiring it. In England and Wales, you may be assessed to need the same assistance but wether or not you get it for free or have to pay for it will be determined by your own financial means. However, in all cases, it is important to acknowledge, with care, just because one may be entitled to a some help does not necessarily guarantee that you will actually be successful in obtaining it. Human resources in care in the UK are more limited than they have ever been for 50 years. Medical care is also free to people of any age who have been assessed by the local authority as requiring it. In the context of care in your home this practically outworks its self as visits from NHS district nurses. If you are in a care home, the NHS will make a small contribution to your care to cover any medical needs you may have.

The cost of care homes can range from £1200 to £3000 per week, depending on quality and location. At the higher end of this scale you would typically encounter ‘hotel like’ care homes geared towards self-funding clients, making them inaccessible to clients funded by the local authority.

Residential care home costs

The cost of care homes can be roughly broken down into three parts:

• “Hotel” costs account for about 70% of care home costs and include food, services etc. These are only paid by the local authority if the resident has assets totalling less than £32,750 – these days that does not apply to very many people, particularly if they own their own home.
• Personal care comprises around 20% of care home costs and in Scotland, these costs are always paid for by the local authority regardless of someone’s wealth – providing the local authority has assessed that the resident is in need of personal care. These costs are not covered in England, hence political calls for ‘capping care fees.’
• Nursing/medical care accounts for around 10% of the overall care home costs and this is paid out of the NHS budget. It covers the medical aspects of care requiring fully qualified nurses such as injections and the administration of medications. Again an assessment would be required to qualify for local authority cover of this cost.

Remember that if the state is paying for your care, you have to accept whatever they provide. If you are self-funding, the control and choice remains with you.

Care at home costs

The cost of care at home typically can cost £28-£40 per hour and can be broken down into two parts:

• Personal care usually accounts for around 20% of care at home costs. These costs can sometimes be reclaimed from the local authority in the form of a direct payment made to you in order to pay your chosen service provider, or you can opt for the council to deliver this service to you – however you will be at their mercy as to the frequency, timing and length of their visits.
• Quality of life activities and tasks often form the bulk (up to 80%) of care at home costs. These include companionship, socialisation, attending appointments, cooking, cleaning and other day to day domestic activities. These are often the aspects of a person’s life that family and friends would take care of, but for someone who does not have loved ones to assist or living locally, or who may be suffering from dementia, they may need a lot of support in this area.

The main benefit of care at home is that you have the freedom to tailor a package to meet your exact needs, meaning that you only pay for what you need.

Prepare for the impact of care on family relations

Given the substantial costs associated with good quality care, money can drive a wedge between family members and influence decisions.

It is a sad fact that money can cause friction between even the closest of relations. Therefore to ensure stable and hassle free care in your later years, you should be pragmatic about the potential impact on familial relationships.

Different family members may have differing opinions on how a loved one should be cared for. Disagreements can occur if one family member feels they are shouldering more of the burden or responsibility, which can impact on them both emotionally and financially.

Seek out quality legal advice as early as possible to discuss how you wish to be cared for in your later years or in the event that you lose the legal capacity to make decisions for yourself. A power of attorney which clearly sets out how you wish to be cared for and who will bear the responsibility for implementing your wishes is essential.

You should also consider involving a trusted solicitor who would be able to intervene, in a neutral and emotionally detached way, should familial relations breakdown – ensuring that there will always be someone to act only in your best interests and according to your pre-agreed instructions.

The key thing to remember is that the elderly client’s wishes should be at the centre of all care arrangements.

Beware of “care bonds” and care insurance policies

In our view, the financial services industry has not yet fully understood or built products for the financial impact of care fees in later life, in particularly, if you want to remain cared for in your own home.

There are some products on the market, like long-term care insurance policies, that guarantee a payout after a period of time and effectively limit the amount you would ever have to pay. As with all insurance policies however, getting them to actually pay out is not always straightforward.

Many elderly people never actually need care or support at all. Therefore you might not get value for money from a policy you paid into for 30 years and never claimed against.

Specialist financial advisers are now emerging onto the market offering personalised investment advice on how to best plan for meeting future care costs, which can be money well spent in the long run.

Beware of ‘deprivation of asset’ schemes

When you gift your estate to your children in order to make yourself appear below the threshold for statutory care fee assistance, this is considered ‘deprivation of assets.’ Some people may decide to put all of their assets into a trust which is protected from a financial assessment.

In our view, the deprivation of assets is a grave mistake for three critical reasons.

Firstly, if you appear to have no money, your care arrangements will be at the mercy of the state. All choice and control is removed and you will not be able to stay in your own home. You will be sent to a care home of the council’s choosing should your needs warrant this.

Secondly, if you are going to live in a care home and intentionally deprive yourself of a capital asset so that you pay less of your care home fees, the council may assess that asset as still being yours. This is known as notional capital.

If you are assessed as having capital you don’t actually possess, you will be charged accordingly. The outcome of this may be that the council decides not to fund your care home fees.

The council can’t refuse to provide someone with the care they need because they have notional capital. They have a statutory duty to meet the care needs that the person is assessed as having. They can however assess the charge payable using your notional income and will try to recover the charge from you or seek to transfer the liability for the charges.

Defending such court actions to recoup fees can rumble on even long after someone has died and cost many thousands of pounds. It is likely that we will see more cases like this being raised over the next 30 years, as local council social care budgets continue to decrease and the demand for care increases.

Thirdly, if you divest yourself of an asset in such a manner, remember that should there be a breakdown in familial relations, your “unofficial” access to that asset may be jeopardised. For instance a divorce between a child and their spouse might result in the transferred asset being classed as matrimonial property and the value being split between the divorcing couple accordingly.

Get specialist care fees advice

Though you are not obliged to get professional advice when choosing how to finance your long-term care, you need to lay out your entire financial situation on the table and analyse how it will shape up over the next 30 years. This includes every need, wish and want you have – even your bucket list.

A specialist care fees adviser has in depth understanding of the care sector and its associated costs, helping you to compare all your options before deciding which one is right for you. They will also explain all the costs and risks involved with each product.

You should also consult with a solicitor specialised in private client law. They will give you tailored support, like drafting your will or power of attorney, and also provide practical advice on matters such as downsizing to a smaller property, setting aside trust funds for children and grandchildren, and inheritance tax planning.

Though planning financially for care can feel daunting, it is a thoroughly worthwhile endeavour. Please contact our team to discuss the costs of care at home.

Find our more about the common misconceptions around care at home costs.