Long Term Care Insurance
At the time a person needs care at home or in a residential or nursing home, the question that is uppermost in the minds of their family is how are they going to afford the cost of the fees for the care. With average costs being over 30,000 per annum, at this point, any hopes of leaving an inheritance for their family disappear as funding their care needs becomes uppermost and they have to fund this care with the sale of the family home.
The current position is that people have to fund the costs of their care if they have assets including their home, above 23,000 in England and Northern Ireland, 22,000 in Wales and 22,500 in Scotland. There are some exceptions to these rules but these are very limited in scope and the move most people make next is to investigate any help available from local charities but this is usually on a temporary basis as charity resources are limited.
Most people want a permanent solution and one of the best is a care fees plan – also known as an Immediate Needs Annuity(INA). The cost of the premium is driven by a person’s age, sex and state of health and is arrived at following receipt of medical information from the nursing home and the client’s doctor. The more frail and dependent a person – the lower the premium costs as, it is directly related to the life insurance company’s opinion on the person’s mortality.
Care fees Plansare a very effective way of protecting a family’s estate against the danger of care fees running away with future inheritances. They allow a family to plan for the expenditure needed then plan for the future with confidence.
These plans are very practical solutions to paying for care and are also extremely tax efficient in that, although the lump sum premium does not qualify for any tax relief, if payments are made to a REGISTERED CARE PROVIDER – one registered with the CQC (Care Quality Commission) – they are paid tax free with no impact upon the tax position of the care recipient. Should a person recover and no longer need care, the annuity can be changed and payments paid straight to them but with tax deducted twenty percent by the insurance company so the annuitant will receive the net amount. However this rate of tax is only applied to a small part of the payment.
If there is an inheritance tax liability, the purchase of an immediate needs care annuity can also be a very tax efficient way of reducing this liability as the cost excluding any capital protection can be deducted from the estate – effectively purchasing the means to pay for the care with a forty percent discount.
Finally, it means that the following aims have been attained:-
A limited sum has been allocated plus a reserve to deal with any unforseen events and the expenses have not been able to deplete the balance of savings.
The costs of care have been ring-fenced. Also the person in care has certainty of their care and retains their dignity and choice in the matter.
Savings are at the lowest level when the lump sum has been paid. Once this has been done, all future care fees are then covered, thus giving any monies left the chance to grow and replace savings.
It is so important that families use the skills of an expert financial planner who has experience in dealing with long term care so that they ensure that they receive correct advice, as this is one time when making the right decisions really can make all the difference to a family’s future.
Before you consider a long term care insurance plan that can protect against huge care fees simply access your remarkable free information written by barbara Davies, CEO of equityCare
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