Later Life Planning
Getting Your Elderly Parents’ Finances Organised
Elderly parents and finances. It’s not an easy topic to talk about with them, but it’s so important. In this article, we’ve teamed up with Shaw Gibbs to explain what you need to know about later life planning.
They provide independent financial advice, communicate in ‘plain English’ to help you understand what you need to know about care fees and getting your elderly parents’ finances organised.
We’ve also included a handy finance checklist at the end which you can download and keep.
The number of sandwich generation caregivers (aka you) is rising. With the older generation living for longer, more and more of us are caring for ageing parents. Their changing needs (for example from a dementia diagnosis or not being as mobile), means that they may well need care which will likely need to be paid for either partly or in full.
Only 5% of care self-funders take proper financial advice and it’s so important to help plan for the here and now or the future. So in this article, whilst we can’t give individual finance advice, we have outlined key things you need to consider when later life planning and protecting elderly parents’ finances.
Talk To Your Parents About Later Life Planning
These might not be the easiest conversations to have but the earlier you can talk to your parents about what they want in later life, and how they could afford it, the better.
Ask them about their savings, pension, income and investments. Find out about their home ownership and mortgage status and look into house sale and rental values. Care home or home care? Understand the type of care they want, so you can see if it’s realistic (based on their finances as well as your own commitments). If their income doesn’t cover the care fees, this is called the ‘care fees gap’.
The more information you have, the more it will help with care fees planning.
Talking to your parents about later life planning while they still have capacity will make your decisions so much easier.
Elderly parents can be suspicious when their grown up children start taking an interest in their finances, so tact and diplomacy are of utmost importance in making it clear that their welfare is your primary concern.
How Much Does Care Cost?
Whilst the NHS provides medical care for free, people need to pay for (or contribute to) social care. Social care helps you with daily activities that can get harder as we age such as getting dressed, washing and eating. We can receive care at home (hourly or live in care) or it could be in a residential care home.
To give you some idea of care costs, a place in a care home can cost in excess of £50,000 a year and almost 50% of people pay their care home fees in full.
Live-in care can actually work out cheaper than care home fees as your elderly parent will not need to pay the accommodation costs. Also, if both your parents live together and need care, it could be cheaper to have a live-in carer. Hourly care is of course cheaper but it can add up.
Care Fees Planning
Care (whether home care or care home) is either privately funded or paid for with the support of the council. In the UK, care fees are means tested and three things are taken into consideration – savings and investments in your elderly parent’s name (or half where jointly owned), property and income.
In the UK, care fees are means tested. Three things are taken into consideration – savings and investments in your elderly parent’s name (or half where jointly owned), property and income.
In England, the savings threshold for care home fees is £23,250 (the amounts are slightly higher in Wales and Scotland).
If your elderly parent is eligible for government support, you won’t necessarily be able to choose the care home. Care home fees differ, and there will be a limit on how much the local authority will contribute. You may however be able to top up the amount.
Funding support can also be used to pay for care at home. There’s a few ways this can work.
A managed account means that your elderly parent’s local authority looks after the funds and organises the care.
A third party account is when another party, often the care provider, oversees the payments.
And the other option is direct payments. This is when your parent is given the budget and they can spend it however they choose, in line with their care plan.
Selling Your Parents’ Home To Pay For Care
When taking control of your elderly parents’ finances you might find that selling the home isn’t always necessary, even if it’s their main (or only) asset.
If one parent or a dependent continues to live in the family home then the local authority cannot suggest that it is sold.
But even if no one else lives there, you may not have to resort to selling your parents home to pay for care. Instead you can set up a deferred payment arrangement or look at equity release.
Deferred Payment Arrangement
One way to avoid selling the house to pay for care is with a deferred payment arrangement. Essentially, it’s a loan or arrangement with your elderly parent’s local authority. With this deferred payment schedule, they cover the cost of your parents’ care fees, secured on the value of the property. The local authority then recoups the costs once the property is sold.
Note, not all mortgage lenders allow for a deferred payment arrangement so it’s important to check with them. For more information on eligibility, this website can help.
Equity Release And Later Life Planning
Equity release helps your older parents access the value tied up in their home, without having to sell the house. They can use it to top up their income to pay for care fees (or even for gifting to the family and inheritance tax planning).
The most popular type of equity release is a lifetime mortgage. Like a regular mortgage, your parent can get a lump sum which needs to be paid back with interest when the borrower either dies or moves into long term care.
The amount you can borrow increases with age – an 80 year old can borrow more than a 55 year old. It comes with a no negative equity guarantee meaning that if, by the time your parent dies, the debt is in excess of the value of the house, the lender will not be able to pursue you, the family, for this shortfall.
Both deferred payment arrangements and equity release are complex, so always check with an independent financial adviser before progressing.
Deliberate Deprivation Of Assets
Deliberate deprivation of assets is when your parent deprives themselves of assets, making gifts in an attempt to avoid care home fees and making the state pay instead. The local authority has the power to investigate this when assessing eligibility for financial support.
If they believe that deliberate deprivation of assets has occurred, they will ask for the amount to be paid as if the assets had never been gifted. This can be especially difficult if the recipient of the gift has spent the money.
Inheritance Tax Planning
This is something to consider when later life planning. Inheritance tax is paid if, following your parent’s death, their total estate and certain gifts are worth more than the inheritance tax threshold of £325,000. Inheritance tax is currently paid at 40% on all assets above this threshold, usually due within six months.
In a married couple, each individual gets their £325,000 plus up to another £175,000 each if they have a main residence worth £350,000 or more. If your parents qualify for all of this, then their nil rate band for inheritance tax could be as much as £1million.
There’s a number of inheritance tax loopholes and solutions. For solid inheritance tax planning, we’d advise you and your parents to speak with an expert such as Shaw Gibbs here.
Financial Power Of Attorney Responsibilities
We can’t talk about getting your elderly parents’ finances organised without mentioning financial power of attorney.
Being appointed your parent’s financial POA means that you can manage their finances if they lose capacity (for example due to a dementia diagnosis). You will be legally responsible for making financial decisions that act in their best interest during their lifetime.
POA is such an important part of later life planning.
If there is no power of attorney and your elderly parent loses capacity, you will need to be appointed their Court of Protection Deputy. It’s not as easy a process as getting lasting power of attorney, so it’s highly recommended that your parents organise this ASAP.
As a side note, you never know what’s around the corner so, like with a will, everyone over the age of 18 should really have a POA in place. You can download the power of attorney form from the government website.
Benefits For The Elderly
There are a few government benefits for the elderly that could be worth investigating for your parents to help pay for care.
NHS Continuing Healthcare
The NHS funds free care for some people with long term complex needs, either at home or in a care home. Your parent would need to be assessed for this and judged to have a primary health need. Having dementia for example does not automatically qualify your parent for this benefit, but it can be worth applying for (and seeking professional advice).
We’ve written a much more in-depth article on this – if you’re considering applying for Continuing Healthcare for your parent, check it out.
Attendance Allowance is a benefit for people over state pension age who need help with personal care due to an illness or disability. It’s not means tested and is to help your elderly parent stay independent and at home (it can be worth up to £4,635.80 per year). You can download the attendance allowance form from the Government website.
If your question is ‘can you claim attendance allowance in a care home’ then the answer is that it depends on your parent’s personal circumstances. If your parent is self-funding their care home fees then this elderly benefit will continue to be paid. If the local authority is contributing then it will only be paid for the first four weeks.
Finding A Financial Adviser
Finances are a tricky topic, and it’s always worth getting independent advice to help you understand your options and the best route to take. If you can, find an individual with a SOLLA later life accreditation like the experts at Shaw Gibbs have – this means they’re part of the Society Of Later Life Advisers and specialise in the older client sector.
This article is all about getting your elderly parents’ finances organised. Whilst this largely focuses on care fees planning, a key part of later life planning is knowing what financial documents need to be in place for when they pass away.
This checklist should help you – you can also download it below, in case you want to pass it on to your parents or other family members.
- Birth and marriage certificates
- All investment and share certificates
- Insurance policy documents
- All account details, passwords for any online accounts
- Loan and credit card details
- Solicitor name and contact details
- Accountant name and contact details
- Financial planner name and contact details
- Recent valuations for all accounts and holdings
- Utility and other providers’ details
- Doctor and any other health professionals’ details
Looking after elderly parents, especially when you’re trying to arrange their care and help to manage their finances, can be confusing and overwhelming. We hope that this later life planning article has helped you to better understand the options available. Every situation is different, so we’d always recommend speaking with an independent financial adviser.
Whilst the NHS provides free medical care, we need to pay for care to help with washing, dressing and other daily tasks that can get harder as we age. We can receive care at home (hourly or live-in care) or in a residential care home. Find out an idea of care costs and how you can help your elderly parents manage their finances here.
Help your parents with later life planning by:
– Talking to them about their savings, pension, income and investments.
– Understand the type of care they would like (care home, hourly care, live-in care) – and what they could afford.
– Work out care fees planning with them. There is lots to consider, from selling the family home, government benefits, equity release and more.
– Speak with an independent financial adviser.
– Read our in-depth article on later life planning.
Not necessarily, even if it’s their main or only asset. Find out more in our in-depth article.