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Post-COVID-19 wealth planning: Care home costs are alarming. Are you really prepared?

Although we all know the cost of care in later life could be significant, few people realise the true extent of care home costs, nor do they adequately plan how to pay for them. Having a comprehensive wealth strategy in place can ensure you are financially prepared should you require long-term care in the future.

In England, unless you have significant ongoing health needs, people with assets worth more than £23,250 are expected to pay their care home costs themselves.

You may want to consider making contingency plans for your care costs, whether that is for a care home or care at home. Having money earmarked for your later life care could give you greater peace of mind and the means to choose the best option. There are other options that you could also consider, including inheritance tax planning or an annuity for care home fees, which are covered in the case study below.

What you need to know about care homes and care costs

Seek advice to plan now and pay later for your care costs

If you are worried about your later life care costs, expert wealth planning can help you set up a ‘care costs plan’ to provide peace of mind and save you and your family worrying about how you will manage to pay for your care home costs if and when the time comes.

If your circumstances change and residential care is required for you or another family member, it’s so important to make sure your adviser takes a holistic view of your total wealth. They can set up the right financial ‘care costs’ plan to see you, or your family member, comfortably through the rest of life. There are a number of ways this can be achieved, including care home tax planning for capital maintenance and help with your inheritance plans, or an annuity for care home fees, as illustrated in the case study below.

Of course, when you or any other family members need care, planning what to do can be very stressful. You’ll be faced with many decisions and may be unsure where to start or who to talk to, particularly when it comes to sorting out how to pay for care as long as it’s needed.

At Canaccord Genuity Wealth Management, in our team of independent wealth planners we have experts who are specially qualified to provide advice in this area and some who are trusted accredited members of SOLLA (Society of Later Life Advisers). Please contact us if you would like an initial conversation to discuss your personal circumstances or for a family member who might need to go into a care home. We can set up a video call to include different family members if that would help.

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How you can structure your wealth to meet care home costs

The following example shows how restructuring your wealth can help maximise income to cover care home fees, while maintaining your capital tax-efficiently for inheritance purposes.

Violet Smith, aged 80 and widowed, was in poor health and had recently moved in with her daughter and her husband, as they were increasingly worried that she wasn’t coping at home alone.

As Violet’s health deteriorated, she made the decision to move into a local care home where she could get the care she needed. Despite having a total of £1.1m from the sale of the family home and her existing savings, all of Violet’s £10,000 annual pension income would now be needed to pay for care home fees.

Conscious of her concerns about the shortfall in care costs and her desire to leave as much as possible to her family, her solicitor sought the advice of Canaccord Genuity Wealth Management. Our specialist care homes wealth planner reviewed her financial position – income, savings and forecast costs – to see whether he could suggest an alternative to dipping into her capital each month that would also maximise her family’s inheritance.

Violet’s care home fees will initially be £54,000 a year – and may well reach £80,000 by the time she’s 95 (assuming a 3% rate of inflation).

Currently, the only way for her to pay these fees is from her savings and annual pension income – which, over time, will reduce from a combined amount of around £1.25m to an estimated £245,000** when she reaches 95.

**£245,000 is Violet’s savings plus her annual pension income minus her estimated care home fees.

Our care home costs financial plan

For Violet’s personal circumstances, our specialist came up with a combination of financial solutions (above) that would give Violet an additional income each month to fund the care home fees, as well as some capital maintenance and inheritance tax planning ideas.

This illustration provides an estimated income of around £61,000 a year, which more than covers her care home fees. In fact, it gives a surplus of approximately £7,000 in the very early years, as the total income received is more than the total amount of expected outgoings; however, over time, Violet would start to dip into the capital. As well as the security of knowing that her fees are covered until she dies, it means that theoretically a combination of fixed income and capital withdrawals should allow Violet to leave about £873,000*** to her family if she lives to 95 (as opposed to £245,000 in her current situation), so they’ll get around £628,000 (£873,000 - £245,000) more gross capital.

Furthermore, because the estate will have been set up more tax efficiently, the family will not need to worry about IHT. Previously, the remaining estate would have been worth £245,000 and exempt from IHT.

If Violet followed our advice:

  • If she dies at 95, according to her financial plan, her estate may be worth approximately £873,000 gross (after £150,000 has been taken out of the estate to buy the care fees annuity)
  • £300,000 (in the IHT plan) is not subject to IHT. The balance of the estate (£573,000) is subject to IHT, however, since Violet’s individual nil rate band of £325,000 is combined with her late husband’s of the same amount, there is no IHT payable.

***£873,000 is £950,000 (Violet’s savings of £1.1m minus her £150,000 annuity) plus her estimated income over 15 years, minus her estimated total care home fees of around £1m. We’ve calculated the figure of £873,000 by using a professional cash flow planning tool which makes various assumptions, including an expected rate of inflation, an estimated investment return rate and Violet’s tax position. In reality, these figures may fluctuate – so it’s important to review your financial plans and any assumptions regularly.

Let us contact you

If you would like help but you're unsure which of our team to contact, let us help. We can put you in touch with an expert that's ideally suited to your wealth management needs.

Find out more

To speak to our later life care specialists, some who are trusted accredited members of SOLLA (Society of Later Life Advisers), please contact us.

If you want to read more about inheritance tax planning, please read the following articles:

If you would like to discuss your care costs plan with one of our independent wealth planners who specialises in this area, please contact Frazer Wilson or Nero Patel.

Important information: This is for illustrative purposes only and not to be treated as specific advice. This article is based on our current interpretation of inheritance tax proposals. It has no regard for the specific investment objectives, financial situation or needs of any specific person or entity. Tax benefits depend upon the investor’s individual circumstances and clients should discuss their financial arrangements with their own tax adviser before investing. The levels and basis of taxation may be subject to change in the future.

Photo of Nero Patel

Nero Patel

Financial Planner

With over 16 years' industry experience, Nero provides strategic financial planning services to a range of private clients at Canaccord Genuity Wealth Management, in addition to professional introducers both personally and to their clients. Nero is highly qualified as a Chartered Financial Planner, a Certified Financial Planner licensee and a Fellow of the PFS. He is also qualified to give advice to vulnerable clients.


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IMPORTANT: Investment involves risk. The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. Past performance is not a reliable indicator of future performance.

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