How much do you need to save for your care in later life?
The average cost for residential care in the UK in 2022 ranges from £704 a week, rising to an average of £888 a week if additional nursing care is required. Care homes that provide specialist care such as Dementia and Alzheimer’s care can cost even more than this too. Prices do vary across the country and some residents could end up paying much more than the average prices for their care.
The high cost of care combined with the fact we’re living longer and more likely to require longer-term care, and it’s easy to see how care costs can quickly eat away at an inheritance.
Many people hope to pass down their wealth to younger generations but with the cost of care increasing, we’re seeing more wealth being channelled into paying for care instead. With the right financial advice, you can plan your finances accordingly and prepare for a range of scenarios. So, if that time comes for you to go into care, you and your family will know what to expect.
Care fees cap
From October 2023, the government will introduce a new £86,000 cap on the amount anyone in England will need to spend on their personal care over their lifetime. However, many sources have denounced this cap as misleading and a figure far from the actual amount that many people will pay for care.
That’s why we recommend developing a financial plan for long-term care.
Why do you need a long-term care plan?
As a population we are living much longer than in previous decades with current life expectancy at around 80 years. As a result, the money you have saved for your retirement and care in later life might not be enough to cover the additional years you can now expect to live. Failure to prepare for this might leave you unable to pay for your care fees. It can also eat away at inheritance and prevent wealth from being passed down to the younger generations.
How to create a long-term care plan
The sooner you start planning for your care, the more prepared you’ll be both financially and emotionally. Have conversations with your family members to set realistic expectations and make your wishes known.
You should designate a power of attorney as soon as you start financially planning for your care and retirement. Giving a trusted person power of attorney means they can act on your behalf if you are unable to make decisions on your financial affairs, property, or health and wellbeing.
You might think giving away your assets will reduce your wealth and the amount you’ll need to pay for care. However, we would advise against going down this route. If the authorities see that this has happened, they’re able to treat the assets as if you still hold them, and require you to use them to pay for care fees.
You can however use your tax-free gifting allowances to give away some of your wealth before you die. The current amount you can give away each year is £3000, which is exempt from inheritance tax.
Expert Financial Advice
The best way to financially prepare for care in later life is to get independent financial advice. Our advisors can help you plan your estate in the best way for you and your family. Speak to us on 01926 405 883 or use our contact form to get in touch.