Planning for the costs of long term care in a care home can be quite a stressful experience.
Our guide helps to give the basic information to help understand what care funding is and where a care fund may be useful.
What is care funding?
Care funds are set up in order to provide you with finance to help you pay for temporary or long term care in a care home.
You can either set up care funding prior to the need for long term care, this is known as deferred care funding, or you may need long term in the present, in which you’d need immediate care funding.
How much does long term care cost?
The cost of being looked after in a care home will typically be upwards of £20,000 a year.
How much does care funding cost?
A care funding plan is expensive and can typically cost around £80,000 to £100,000. However, as the price of a care home is also expensive, care funding may well be worthwhile.
Local authority care home funding
Your local authority will help fund your stay in a care home if you meet certain requirements. One of the requirements for receiving financial help is if you have less than £23,250 of capital (the value of your savings and assets).
Your eligibility for financial support will be individually assessed (means tested).
In Scotland, financial help is given if your capital is less than £22,750 and in Wales if your capital is less than £22,000.
The value of your home will be included as assets unless certain conditions apply, such as if your stay in the care home is temporary or your former home is occupied by a partner or relative who is particularly dependent on the home (eg over 60 or incapacitated).
The amount of financial help that councils will contribute will vary from area to area.
How can long term care be funded?
To provide the money necessary to set up care funding some of the following options may be necessary:
- Use of savings
- Renting out your home
- Sale of your home
- Release equity from your home
Who provides care funding?
The two largest providers of care funding are Partnership and Friends Life.
What are the benefits of care funding?
Care funding is designed to help you pay for care for as long as you need it.
Payments to a care fund should be free of income tax.
Are there any disadvantages of care funding?
To pay for care plans, a large lump sum needs to be invested.
Should the worst happen and you die soon into your care the money invested in the care fund may not be able to be withdrawn by your relatives. Some care plans, however, may provide a return of money given certain terms apply.