8 - Long term care Flashcards
What is long term care and why is cover needed?
Long term care is required when you have an illness or injury that means you can’t carry out your activities of daily living (ADLs).
The state requires that those with savings contribute to their own care so some insurance cover may be required to cover these costs.
What state assistance is available?
- NHS funded nursing care - If you need nursing care in a nursing home you are entitled to this allowance, which depends on where you live, but is not taxable and not means tested
- Attendance Allowance (or PIP for under 65s) - Available if you pay your own care fees (and meet the relevant criteria)
Note that these are available only if you have a specific illness or condition that requires medical care (i.e. nursing home). If you’re just old these do not apply and you will be means tested to see how much the local authority will contribute to your care.
Means Testing
What is taken into account in the means testing process?
What is the personal expense allowance?
The local authority is responsible for means testing and takes into account your levels of income and assets and the level of care you require.
Almost all income (including earnings, pension, state benefits) and assets (including cash, savings, shares, ISAs, investments) are taken into account.
Your home is also taken into account unless your partner (or former partner), your ex if they have kids or any relative over 60 or under 18 lives there.
Personal expense allowance is the amount you are allowed to keep each week to pay your own expenses, which the local authority must “leave behind” in their calculations.
How much is the personal expense allowance?
This is £24.90 in England and NI (£26.40 Scotland, £27.50 in Wales).
The local authority must make sure you have this amount of money left over after their means testing calculations.
Deliberate Deprivation Rule
The local authority can assess whether you have deliberately given away assets for the purpose of reducing your wealth to beat the means testing.
If they decide you did give away assets for the purpose of avoiding contributing to care, the calculation assumes you still own those assets!
How is the means testing calculated?
There is a lower and upper level of savings (different levels for England, Scotland, Wales, NI) around £15k to £30k.
Below the lower level the council pays everything, above the higher you pay everything, there is a sliding scale inbetween.
Immediate needs plan
An immediate needs plan can be bought when you are already in poor health and know you need care.
Essentially it is an impaired life annuity. That is, an annual income for the rest of your life to cover care costs, but should be at a lower than normal cost as your life expectancy is lower (i.e. imparied life).
Deferred Care
This is a plan that pays out care costs after a deferred period.
Care cash plan
An insurance policy that pays out a cash lump sum or income stream if you experience specific conditions (eg alzheimers).
Equity Release
Two types
- Lifetime Mortgage (either roll-up or interest only) - Self-explanatory, just borrowing against your home with the intention that it gets paid off when you die or go into a care home (the house will be sold to pay off the mortgage).
- Home reversion plan - Only for over 65s, this allows you to sell all or part of your home but remain a tenant until you die
Viatical Settlement
A viatical settlement is selling your life policy when you are terminally ill for a percentage of the final payout.
It is a way of releasing the value to cover care costs.
