Posted on: 25-10-2017 in Retirement Planning
To help you find the best Long Term Care funding approach for you or someone in your family, we have compiled a list of the most common and reliable ways to fund the care at home or even fund the stay in a care home.
The UK offers a state contribution for Long Term Care costs. After some recent government reforms, the lifetime cap for 2017 was increased to £75,000, while the upper limit in residential care was increased to £123,000. However, not everyone is eligible to apply for local authority funding. If the value of your savings plus assets (sometimes including your home) is equivalent to £23,250+ in England, Wales or Northern Ireland, or £26,250+ in Scotland, then you will have to pay for the care with your own resources. If your partner is still resident in your home, the value of your home will not be included when your total value is assessed to determine your eligibility. If you successfully apply for this type of funding, you can choose to get Direct Payments (attached to the condition to use the money based on a pre-determined plan), or receive the care services directly offered by the Local Authority, maybe through a health provider.
If you have a disability or a severe health problem, but your total assets value goes above the Local Authority Funding threshold, don’t get discouraged – you can still benefit from NHS’s Continuing Healthcare. The CHC represents a form of funding provided by NHS to those who have a primary health need but are not in the hospital. At this time, your health will be assessed rather than your combined assets. It’s worth mentioning that you can get the NHS funding independent of whether you stay at home or in a care home.
Here we get to a form of long-term care funding where you need to use your own resources. Downsizing is about selling your house, buying a smaller and less expensive one, and using the rest of the funds to pay the Long Term Care. It is like a reverse of flipping houses for profits. The advantage of this move is that you have full control over your assets – there is no package that requires a monthly payment, and there is no risk involved. You can still combine downsizing with some of the two options above, in case you are eligible for that.
Equity Release resembles a type of loan where you can get a lump sum or regular payment against your house. There are more equity release plans to choose from, but two are common: Lifetime Mortgage and Home Reversion. If you opt for Lifetime Mortgage, you can get Long Term Care funding against your house, and then pay back the loan after selling your home (or it can be sold when you die). Going for Home Reversion scheme would suggest that you can get funded by already signing a sell contract on your home, or part of it, but keep living in it for the rest of your life.
The good news is that you can opt for more options and even try to combine them. Other methods to fund your Long Term Care include annuities, bond investments, and renting your house or car. In annuity contracts, you deal with an insurance firm by paying an upfront lump sum with the goal to get paid for Long Term Care on a regular basis for the rest of your life.