Some jokes never go out of fashion: why is abbreviation such a long word? why is there an S in lisp? and why is there only ONE Monopoly Commission? While the Monopolies & Mergers Commission is now http://www.competition-commission.org.uk/ the Royal Commission on Long-term Care for the Elderly http://www.dh.gov.uk/en/Publicationsandstatistics/Publications/PublicationsPolicyAndGuidance/DH_4008520 which reported back in 1999 is about to be resurrected as Commission on the Funding of Care and Support (no website yet) which might prompt another question – why so many care commissions?
The previous one started its work in 1997 and after much consultation, came up with the cop out conclusion “Somebody else should pay for it” or care should be free for all. This helped nobody, not least the government which had hoped for some brighter ideas. The members of the latest Commission have been announced and the coalition is actually now looking at Labour’s previous proposal of a one-off £20,000 tax to pay for it. Ideas like this may sound plausible, but as taxes are rarely ring fenced for one particular thing, the revenue just disappears into the great government money black hole. What comes out in benefits, is anyone’s guess.
Staying with the tricky subject of long-term care, there are no pre-funded long-term care products in the UK now after Partnership Assurance (formerly Pension Assured Friendly Society) suspended its Care Prepared product last week after selling 21 policies in the previous year http://www.citywire.co.uk/new-model-adviser/partnership-shelves-last-remaining-pre-funded-care-product/a413056 Bit strange as these products are big business in the USA where care for over 65s is paid for under the Medicare program. For the uninitiated, pre-funded care plans are taken out while you are healthy and pay benefit for physical or mental disability with the assesment being done independently of the insurance company.
Immediate Needs plans which are basically a special kind of annuity, are still available and selling steadily as they enable you to cap and plan for the cost of care. Here you pay the insurance company a hefty lump-sum, and they pay a specified level or escalating amount each month to cover the cost of care, taking on the risk of how long the person receiving care will live. Just the sort of thing you have insurance companies for.
If benefit is paid direct to the care home, then this is tax-free and can save tax for the person in care. If they received money from their portfolio and then paid for care, their income would be taxed and they would have to pay for care out of net income.
The scenario of “What happens if they die after a few months?” can be insured separately at modest cost. This in turn enables you to do some financial planning with the rest of your money before it runs out. Sadly, this happens regularly as people sell their home, move into a care home, put the often six-figure sum on deposit and hope the money lasts longer than they do.
The bright side here almost becomes the dark side. People settle in to their new home but the cost of care tends to escalate at more than the rate of inflation and current interest rates. Capital dribbles away and the beneficiaries and family member wonder if there will be anything left to pass on. Once the assets are down to around £22,000 the local authority should start chipping in, but different councils apply the rules in different ways and the upper and lower “notional capital” limits are slightly different in the four parts of the United Kingdom
Worth mentioning the boundary here – in hospital the cost of treatment is borne by the local health authority. Pass through the hospital doors and care is the responsibility of the local authority who apply a means test before paying for anything. Exception here is if treatment continues outside the hospital. Care Home Selection could be a useful link here: http://www.carehomeselection.co.uk
For years, solicitors have had people marching in through their doors saying “I want to give my house away so the local council won’t get it!” People who have nothing, get their care paid for while better off people may not – until the assets have been used up. Care costs can also wipe out any Inheritance Tax liability. One hears of trust arrangements which will protect assets and life insurance bonds for example, are excluded. An insurance bond is technically a life insurance policy rather than an investment although it may contain a huge portfolio of investments. Hiding assets is called deliberate asset deprivation and is definitely a growth industry. The assesment questionnaire asks about disposals made in the previous 6 months, but case law suggests otherwise and disposals made years before have sometimes been ruled ineffective, so the picture can be almost as clear as mud.
Get the right advice from someone with specialist knowledge, and the chances are that the care needed for yourself or your loved one will be paid for in a home that they like, plus there will be something for the beneficiaries.