Planning for long-term care costs: myth busting

This article was written by Andrew Chastney and originally published by Canaccord Genuity Wealth Management (CGWM).

Paying for long-term later life care is not something many of us want to think about – or plan for – but it can easily creep up on us and suddenly become essential.  

Our team of qualified experts have specialist experience in later life care planning and are here to help. To start with, in this article, we bust three common myths about paying for care*.

Myth one: the NHS will pay for any care costs

Be warned: don’t assume the NHS will pay for your care.

In fact, the NHS will only fund your ‘care’ in very limited situations – primarily when you need care in relation to your ‘medical health’. In this instance, NHS Continuing Health Care (CHC) could pay the entire cost or simply provide limited NHS nursing care. This is complex to navigate and can feel daunting at an already upsetting time.

And while you may believe it is self-evident that you need care for your ‘medical health’, it can be very difficult to obtain NHS funding, even when it appears fully justified. For instance, many people living with dementia require full-time care, but this is often identified as ‘social care’, rather than ‘health care’. If you need social care, this usually means you will have to pay for it out of your own pocket.

If NHS funding is unavailable, what’s next?

While this varies depending on which part of the UK you live in, you’re likely to have to pay at least part of the cost. Using England as an example:

• You’ll be ‘means tested’ through a financial assessment and be expected to pay care costs in full if the assessed value of your assets exceeds £23,250
• With assets below £23,250, but above £14,250, the local authority should pay part of the costs and you’ll be expected to pay the rest
• With assets below £14,250, the local authority usually pays the full cost.

Myth two: you’ll always be forced to sell your home to pay for costs

It is a common misconception that you’ll have to sell your home. It all depends on your circumstances.

You won’t be forced to sell your home to pay for care if you, your close family, or your partner lives there. Even if this is not the case, local authorities have the discretion to ignore your home in any assessment.

However, if you move into a care home and leave your house empty, it will be considered in your financial assessment. In this case, you may need to sell your home to cover your care costs.

We always recommend discussing your later life care preferences and requirements with your family. We are often asked to facilitate this conversation to discuss your future plans, and we are always happy to visit you at home or arrange a video call with you and your family.

Myth three: you can protect your assets by giving them away

If you gift your home or other assets, whether to another individual or into a trust, with the intention of excluding the assets from any means testing, you are likely to be disappointed.

If the local authority considers that you have deliberately evaded care costs, you may find that the value of the gift is included in any financial assessment. This is called a ‘deliberate deprivation of assets’ and could cause significant financial difficulty for you at a time of real need. If in any doubt, we’d always suggest you consult a family solicitor before making a gift, or our Wealth Planners can advise on gifting as part of your overall financial plan.

If you made gifts many years before any care need arises, it’s unlikely that this will cause an issue with means testing, although you could still be financially exposed if it means you can’t afford your preferred care home or method of care.

You may also feel that you can give away assets well before any need arises, on the understanding that the receiving party will return the gift if you need to pay for care. Again, this could be considered a ‘deliberate deprivation of assets’ if it was made at a time when you could have reasonably expected to incur care costs. There’s also a risk that the funds you’ve given away are no longer available when you need them, for example if the recipient has got divorced or spent the money.

Our biggest piece of financial planning advice is to only gift what you don’t and won’t need. We can help you work this out through our financial planning consultation, and in particular, cash flow forecasting or modelling is a very useful tool – more on this below.

Planning for care costs

In an earlier article about cash flow modelling, we refer to ‘known unknowns’. This is often the case for long-term care planning. Most of us have no idea if we’ll need long-term care. We don’t know how much it will cost or the duration of the care needed if we do. This is why it’s important to plan early for this ‘known unknown’ where possible.

Another ‘unknown’ is future government policy. Assuming ‘no change’ seems an appropriate approach for now. However, it is something we keep a close eye on so we can update our clients’ financial plans if needed.

We use cash flow modelling as it is a great tool to ‘stress test’ various scenarios, based on your personal circumstances. It can give you some idea of how well placed you are to meet care costs should they arise. We can also make various assumptions as to timing and costs, and then consider how to best plan. There are different solutions available, including specialised products like a long-term care annuity, and we will present the options and recommend what we believe will give you the best outcome for your situation.

Take care of your future care

Long-term care is one of the most challenging areas to plan for – with many of us in denial that we will ever need it.

Our team of independent Wealth Planners includes experts who are especially qualified to provide advice in this area including accredited members of SOLLA (Society of Later Life Advisers).

Please get in touch if you would like to talk to us. We are happy to arrange an initial, no obligation conversation to discuss your personal circumstances or those of a family member who may need a plan for later life care.

*This article relates mainly to the position in England. The Scottish system is generally more generous.

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