Do I need to plan for Long Term Care?, Why should I bother to do anything?
A major consideration for family money is providing for long term care fees.
You could look at this in two ways. -
1. we need to keep hold of our money in case we need care ourselves, OR
2. we need to give our money away (redirect it) because others in the family need long term care
You can solve the dilemma, but first you might want to consider both the cost and likelihood of Long term care. Go to www.caringmatters.dial.pipex.com
Long Term Care is a type of disability where we can't look after ourselves.
A paper entitled "DISABILITY – GLOBAL TRENDS AND INTERNATIONAL PERSPECTIVES" by Professor Les Mayhew, and presented to the Staple Inn Actuarial Society in 2001 says: -
"In richer countries disability splits into two broad types. First there is congenital disability and disability caused by accident or trauma and affecting mainly younger age groups (although accidents are also common in old age).
Some disability in this category, for example arising from road accidents, could fairly be described as partly preventable.
The other category is disability associated with ageing. This is variable in onset, severity and progression and is much more likely to be age and life-style related and includes a higher incidence of conditions related to cognitive illness and mental health as well as physical disability. Old age disability may thus be fairly described as essentially inescapable, although potentially deferrable if individuals take appropriate precautions with their health."
Current statistics and forecasts tell us to expect almost 40% of those aged 75 to need some form of care. About a quarter of those (so around 10% of those aged 75) are expected to need to go into a 'home'. The percentage needing formalised care (e.g. a nursing home) tends to rise after age 75 so it is a significant risk.
Can I plan for it?
Look after yourself
The most effective way to handle it is to mitigate it. Meditate, do yoga, eat carefully, exercise, teach, sail, engage the brain, and don't watch the world go by.
Defer taking income until you need it
Another good way to provide for our own long-term care is to defer taking your pensions as long as we can. If you're not well when you come to take your pension (that's any age between 50 and 75), you can arrange an enhanced annuity ( known as an impaired life annuity) which will pay a much higher income for life than is normal. That should provide what you need for Long Term Care fees in most cases.
A respected IFA in this field, Dr. Penny O'Nions and a specialist in health care, says that some diseases actually increase life expectancy, so this impaired life annuity idea would not work - Alzheimer's is just one example.
Insurance as a back stop
About two thirds of the diseases we could contract will reduce our expected lifespan, which reduces the need for longer term planning. Just in case you might contract the other third, then, you might consider using 'belt and braces', and buying a long-term care policy.
But I thought the State would pay?
If you're thinking that the State will pick up the tab anyway, then refer to the above report again:
"A lower bound world estimate for the level of disability in all categories is 500m people rising to over 1 billion by 2050 with the proportion of disabled rising from around 8% to 14% over the period with further increases thereafter."
Now imagine you're the Secretary of State for Health. Saunter along to your generous, helpful Chancellor of the Exchequer, and tell him that you' are going to need an extra £10 billion in long-term care costs in today's terms by 2030. You don't have to wonder what he's going to say!
There is legislation that is supposed to ensure that the State will pay something towards the cost but the long-term problem is always going to be whether the economy can support those payments at the time you might need it most.
I think we're going to have to assume that we will have to pay our own long-term care costs.
As mentioned above, you can reduce the physical risk of needing Long Term Care by exercise, meditation, and reducing stress, which is proving to be the most effective strategy
In addition, you can reduce the financial risk of needing it.
* delay taking pensions so that you can use an impaired life annuity (the statistics say that 25% of us will be 'impaired lives' by the time we're 75);
* if you have reckon you have enough money to cope with the LTC fees, don't worry
* otherwise, buy LTC cover if you're still worried.
Now, we can go back to the original question.
Should we release family money to provide for Long Term care needs in the family?
Not specifically, we think. If giving away money during your life might leave you short of capital, provide for a Family Trust in your Will, but make it capable of reacting to whatever need arises.
What's the best buy?
The best buy is to rely on impaired life annuities, but it's not a complete solution.
You might want to consider long term care insurance when you're aged 50+. If you do, use an IFA.
Go to Members Directory and this will help you search for a list of experienced advisers in your area.
SUMMARY OF HOW TO PLAN FOR LONG TERM CARE
In order of priority: -
1. Mitigate (reduce stress, exercise, eat healthily, use brain)
2. Delay taking pensions
3. Save. Consider renting part of your home, or boosting income some other way - is this practical? Will it work later, when you're ill?
4. Use impaired life annuities
5. If the above steps fail, check with your planner how much LTC you might need and confirm that buying assurance increases the chance of achieving your objectives.
6. If it's a good idea, then buy LTC insurance. The IFA will take care of the applications.
