Cost Of Long Term Care Insurance

When families have a relative who needs care at home or long term residential care, the big question on everyone's lips is how the fees are going to be met. With average annual fees of over 30K , the cost is beyond most people's income and, the usual resort for funding this care is through the sale of the family home. It is at this point that the relative in care can see the home that they worked so hard to pay for having to be sold with any hopes of leaving an inheritance to their loved ones fast disappearing.

With asset limits, including a person's home, set as low as 23K in England and Northern Ireland, 22K in Wales and 22.5K in Scotland, it means that most people will have assets above the local authority funding limits and will have to pay for their own care, unless they qualify through one of the very limited exceptions to these rules. Help is available from local charities, but their funds are limited and not to be relied on as a long term solution.

A care fees annuity - otherwise known as an Immediate Needs Annuity(INA) is a very effective way of planning for the future costs of care fees. The lump sum premium is determined by how old a person is, if they are mail or femail and their health condition. Underwriting is done by receipt of medical information from a client's doctor and the care home. The greater the degree of frailty and illness, the lower the premium as the cost as is dependent upon the insurance company's view on the person's expected longevity.

The care fees annuity solution is a much underused method of ring - fencing a family's assets as, once the future costs of care have been covered plus a margin for any extras, it puts a stop-loss on the situation and any amounts remaining are likely to become an inheritance for those mentioned in the Will.

Although the lump sum premium does not qualify for tax relief, as long at the monthly payments are made directly to a registered care provider, they are paid tax free and do not affect the tax position of the person receiving the care. (To be a registered care provider, they must be registered with the Care Quality Commission).These plans are flexible as well as tax-efficient as, should the person no longer need long term care, the net payments can be paid directly to the person with tax deducted at 20% by the annuity provider. although this tax applies only to a fraction of the payments.

As well as providing for the cost of care fees, these plans are also a tax efficient way of reducing an inheritance tax liability because, whilst securing a 40% discount on the cost of the care fees annuity, the cost of the lump sum can also be deducted from the estate as long as this excludes the costs of any capital protection.

Finally, it means that the following aims have been attained:-

A finite amount has been allocated plus a contingency to cover any unexpected events and the costs have not been allowed to run away with the remaining estate.

The capital amount is at its lowest when the lump sum has been paid. Once this has been done, all future costs to the amount covered by the premium paid, are covered, thus giving any monies the chance to regenerate the estate.

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.

All of the above can be achieved by taking professional guidance. Families in this situation can really be helped to take control with the help of a financial planner who is an expert in long term care matters.

Before you implement a long term care insurance plan that will safeguard against large care costs just access your remarkable free article written by barbara Davies, CEO of equityCare

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