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Mr William’s family approached us because his health was deteriorating and he was recovering from a recent fall. His children had Lasting Power of Attorney so were dealing with his financial affairs. He was age 84 and felt that he was vulnerable being left at home on his own and needed care to avoid Deprivation of Liberty. He needed a lot of assistance with activities of daily living throughout the day and and also needed assistance at night and they had found a suitable residential care home where the fees were £1,650 per week. This works out to be £85,800 a year which is £7,150 per calendar month.
This home was more expensive than other smaller Care Homes they had visited but it was the families preferred care home as had large communal areas, lovey gardens and plenty of activities where their father could maintain his independence and dignity.
Mr Williams was very keen for his grandchildren to benefit from an inheritance. His main asset was his property which was being sold for £575,000 and he had other savings and investments totalling £60,000.
He had a state pension plus his private pension. They were not aware that Mr Williams could claim the Attendance Allowance and following the initial meeting a claim was made straight away. He was successful in claiming £101.75 per week (2023/2024 Rate) and this additional benefit took his total net income to £25,800 per annum. Therefore there was a shortfall between his income and £85,800 annual fees of £60,000 per annum.
Their question to us was: “Is this care home affordable for his lifetime, we do not want to be in a position where dad has run out of money and has to move her to a cheaper Local Authority home”.
Our solution was to arrange an Immediate Care Plan for Mr Williams that used just part of his capital and guaranteed an income to meet the current shortfall in his care fees, £60,000 a year, for the rest of his life. We checked with the Care Home and they confirmed previous inflationary increase in fees had been less than 5% each year so we arrange an Immediate Care Plan with built in 5% annual escalation. With the possibility of inflation running a lot higher than this, we also recommended he keep substantial funds in easy access deposit based savings.
The cost of a plan to provide a guaranteed lifetime income of £60,000 escalating by 5% every year was a lump sum premium of £227,415.
Mr Williams funded this from his property sale proceeds and bought an Immediate Care Plan (Immediate Needs Annuity) that gave him the peace of mind of a guaranteed income for life of £60,000 per annum increasing by 5% each year. This income is tax free provided that it is payable direct to the Care Home and is fully portable if for any reason he has to move to a different Care Home.
This removed the worry of running out of money and meant that Mr Williams could be happy in his first choice of home while his family would have the peace of mind of knowing that the fees would always be paid at the assumed fee and inflation level. Mr Williams was happy knowing he was likely to be able to leave his grandchildren a substantial inheritance of well over £400,000 as his remaining estate was now effectively ring-fenced from the Local Authority and the costs of care to bequeath to his family.
The levels and bases of taxation and reliefs from taxation can change at any time and are dependent on individual circumstances.
Please note that the name has been changed to protect our client’s identity.
The advice provided was given after a full evaluation of their specific needs, circumstances and requirements. The solutions provided would not be suitable for everyone and the information provided does not constitute advice.