There are several immediate initial questions to be considered:

• Which home will be suitable?
• What sort of care is needed? – Residential, Nursing or EMI
• How much is the cost?
• Will Social Services pay?
• Will the NHS pay?
• How long is the elderly person likely to live?
• How much money is available to pay for self funded care?
• Are all allowances being claimed – Attendance Allowance and/or Nursing Care Contribution?
• Does the elderly person wish to leave an inheritance to their heirs?

Which Type of Home?
There are basically three types of homes available for elderly people.

• Residential Homes. These provide full subsistence and care but not nursing.
• Nursing Homes. These have qualified nursing staff, 24 hours per day
• EMI Units (Elderly & Mentally Infirm). These provide a much higher level of nursing in a secure environment

It is important to consider whether personal needs will change in the future, requiring a higher level of care.

Social Services and NHS
Social services are responsible for assessing the physical and mental needs of the elderly and suggesting suitable homes. They also assess their financial situation but help only if the elderly person has less than £22,250 total capital. If the capital is over £22,250 they will not qualify for assistance from the local authority and must fund any care themselves, until such a time as the capital falls below this amount - the home fees will therefore have to be met from the capital and income.

Once the capital is eroded social services will provide financial support, according to their budgets, and will utilise all the income the elderly person then receives leaving an amount of only £21.15 per week for personal expenditure. This could include selling the house the person had lived in.

According to local authority guidelines the current funding available outside London for those over pension age in residential home care is £375, rising to £460 per week for nursing home care (It is possible for these figures to vary slightly from area to area). Any difference in the current cost of care and the local authority funding guidelines will usually have to be topped up by the family or the elderly person may have to move to a home within that funding level. Also, social services will select the home and it may be some distance from where the person lived or where the relatives are.

The NHS have a duty of ongoing duty of continuing care and are required to find and fund a  home for anyone discharged from hospital if they still require a high level of nursing.

Options for Private Funding

Using Existing Capital.
This basically involves using any capital and/or the elderly person or their family has to fund the fees on an ongoing basis. The risks to consider are:

• How long will the person live and how long will the money last?
• Will the person need more expensive care in the future? This would reduce the money available at a more rapid rate.

This option could be combined with investment of the capital in low risk funds but these tend to have low interest returns and not keep up with inflation.

Buying an Immediate Care Plan.
It is possible to buy an Immediate care plan at any time the elderly patient is deemed by the insurers to be in need of assistance with two or more of the ‘activities of daily living’ (moving/walking, feeding, washing, toilet etc) or are mentally impaired. It does not have to be purchased in advance and plans commonly don’t start until the person is already in the home or needs care in their own home.

For a one off lump sum, a plan can be purchased which will pay, direct to the home, an agreed regular monthly sum for the rest of the elderly person’s life to cover the fees. The sum paid can, and usually is, designed to increase by one of several inflation factors.

The key issues of these plans are:

• Once the amount required has been decided, several insurers will quote, based on medical evidence,  the one off sum they require to provide the cover
• The payments will continue till the person dies – however long that is
• The payments will stop on death.
• The payments can be inflated annually
• Once the payment is made, there is no cash value in the plan
• It is possible, for an additional fee, to buy a degree of protection to repay some of the capital to the estate if the person dies quickly. This is on a reducing tapering scale

Some homes will negotiate a cap on fees where a plan with quarantined inflation is in place.

There are three ‘winners’ with such plans:

• The elderly patient has the security of knowing their fees will be paid till they die
• The relatives don’t have to worry about ongoing, probably escalating, costs with diminishing funds available to meet them. Any remaining inheritance is protected and can be passed on to future generations immediately.
• The home knows that fees will be paid and don’t have to face the problem of either magnanimously reducing the fees if money runs out or even turning the elderly person out into the hands of social services.

Inheritance Tax Implications
If the elderly person has assets above the Inheritance tax threshold (£312,000) the lump sum will come out of the potential estate. In effect, this reduces the premium, in the long term, by 40% for anyone with more than this amount of capital

Once the elderly person is secure in their home with their fees guaranteed for the rest of their life, it is possible to move all remaining assets to their heirs as a potentially exempt transfer. The Court of Protection will accept this because it has been demonstrated that the elderly person’s needs have been adequately covered for the rest of their life and they no longer have a need for the money. This would not be a possible course of action without such a guaranteed plan.