The number of over-65s has increased in more than 80% of areas across England and Wales during the last four decades, Sky News reveals. Thanks to the wonders of modern medicine, most people stand a very good chance of living longer than previous generations.
That said, this brings challenges of its own, as a longer life is more likely to mean later-life care, and that could be expensive.
As an accountant or solicitor, you may be interested in research that suggests that there appears to be a link between higher house prices and increased likelihood of funding care.
Read on to discover why clients with valuable homes might be more likely to pay more for their care and how a financial planner could help.
Before we do, let’s consider why long-term care is typically so expensive.
Depending on your client’s care needs, the cost could exceed £64,000 a year
According to PayingForCare, in 2022 the cost of a care home could range from £28,392 a year to £45,760 a year, depending on the level of care a client needs and where they live in the UK.
A care home typically uses care assistants to look after residents, whereas a nursing home uses registered nurses and care assistants.
Because of this, if your client requires the latter it could cost between £44,876 and £64,064 a year. Furthermore, with the skyrocketing cost of living these figures could increase significantly throughout 2022.
How much of the costs your client has to pay will typically depend on their wealth, which includes the value of the property or properties they own. While the government introduced a new social care cap in 2021, it may not protect your clients from having to sell their home to pay for their care.
Even with the government social care cost cap, your client’s home may still need to be sold
In November 2021, Boris Johnson announced that after October 2023, the only people who will pay for care are those with assets above £100,000. Those with assets of less than £20,000 will typically not pay anything towards their care, and those with assets in-between will pay an amount that’s calculated on a sliding scale.
Furthermore, Johnson capped the total amount those in care pay to £86,000. While this is good news, there is also a catch, as the government’s limit only covers “personal care” such as washing and eating. It does not cover the cost of food, rent or energy bills.
According to the Telegraph, someone paying £1,100 a week for residential care typically spends £350 on personal care. As the remaining £750 is not considered personal care it falls outside of the £86,000 limit.
As you can see, this means that if one of your clients goes into care, they could still face a significant charge, which might mean they have to sell their home to settle it.
The more your client’s home is worth, the more likely they will have to sell it
Research by Just Group reveals a link between more expensive house prices and the chances of a client being asked to pay for their own care.
While the research looked at regions within England, it concluded that there appeared to be a link between higher house prices and the likelihood of an individual being asked to fund later-life care.
It found that the south-east had the highest average house price at £384,966, and more than half of people (51%) in the region paid for their care. In the north-east, where the average house price was £154,913, less than a quarter of people (22.5%) paid for their care.
In Yorkshire and Humber, more than a third of people paid for care costs.
It’s worth remembering that, as local authorities can ask your client’s family to sell a property to pay for care costs, it may be more inclined to do so if the home is worth more. This could significantly reduce the amount your client then leaves to loved ones after their death.
There is good news though, as a financial planner may be able to reduce the effects of care costs on your client’s wealth. The following are three ways they might be able to do this:
Checking your historic investments
If your client already has certain types of investments a local authority cannot include them in a financial assessment. This could significantly reduce their wealth’s exposure to care costs.
Financial protection
While protection products that can help with the cost of care are no longer widely available, a financial planner may be able to organise an “immediate needs annuity”. This could help mitigate the effects of long-term care costs if your client is in a home for an extended period.
Existing financial protection
A financial planner can assess what cover your client already has, and whether it could help cover the cost of care.
Get in touch
If your client is considering making gifts to loved ones as part of their IHT strategy, they should consider the “deliberate deprivation of assets” rule. This is when a local authority rules that a gift was made to avoid care costs, and so includes it in a financial assessment when deciding whether someone should pay for care.
If you or your client would like to discuss this, or any of the other points raised in this month’s blog, please contact us on hello@ardentuk.com or call 01904 655 330.
As an award-winning financial advice company that was a 2022 VouchedFor Top Rated firm, you will have peace of mind that your clients will receive excellent advice and the highest quality service.
Please note
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
