Page 5 - Guide To Planning for Care Costs

As always there are disadvantages. When the house is sold part or all of the proceeds will be payable to the
lender and therefore will not pass to your children or be available to you.

On the other hand the money released by the lifetime mortgage is immediately available and can be spent
or gifted so long as the purpose of any such gifts is not to reduce your assets in order to qualify for assistance
with care costs. Subject to that, this option should work to diminish the assessment.

OPTION 4–IMMEDIATE CARE(OR NEEDS) ANNUITY (CARE BONDS)

Another possible measure is to take out insurance to cover the cost of your care. In the event of going into a
nursing home, the insurance would pay a regular stream of income for the rest of your life offsetting the costs
of care and meaning that no assessment of your means needs to be carried out. The premium on such
insurance can be paid a lump sum at the point of entering care. The premiums are, of course, dependent
upon the age and state of health of the applicant. For an older person in poor health, this option could be
particularly cost effective.

The Inland Revenue have stated that the amount payable by the annuity can only be equal to or less than the
actual charge made by the care home, that there cannot be a surplus to the estate, should there be a
reduction in the home care fees charged or in the unlikely event that the individual returns to their home to
look after themselves.

The usual method of purchase is a single lump sum payment in exchange for an income to cover all or part of
the costs of long term care for the life of the individual. It is also possible to have different options
depending on the circumstances and assets where the immediate needs annuity can be deferred.

TO SUM UP.

Option1 can be effective against a care cost assessment and option 2 is at the moment proving effective for
the same purpose. However we cannot say for certain that assessments will be made in the future under
the same legal and practice framework as they are currently being made. We cannot therefore say for
certain that both options will always work in the future. For that reason clients using either of these options
have to accept there is a certain risk involved. In both options 1 and 2, the longer the passage of time before
the assessment, the better.

For care costs there is no one size fits all solution. Each family should consider care costs in their forward
retiral planning, take advice, and choose whichever route which best suits their needs and wishes.

Please note that we do not advise on tax matters unless specifically agreed in our terms of engagement
letter and clients must take their own advice on tax matters. We are of course happy to refer you to tax
advisers, and to co‐operate with any tax advisers you instruct.

We understand this is a complicated area and requires careful thought.

If you are concerned about this or would like to find out more please phone Sarah Patrick or Lesley

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