Sally's story: a fictional case study for illustrative purposes only
Sally showed early signs of dementia just after her 81st birthday. Over the next few years, the condition worsened. She moved from her own home to hospital and then to a residential care home with fees of £35,200 a year.
Sally had modest savings in a building society account, received a private pension, state pension and Attendance Allowance. Sally’s daughter - who had registered a Lasting Power of Attorney - managed her affairs. She knew that Sally was keen to leave a legacy to her family, and was concerned that Sally's savings would run out, forcing her to rely on state benefits.
For the first 12 weeks, Sally's home was exempt from the means test. Because her savings were smaller than the lower means test threshold, her local authority contributed towards her care home fees.
After 12 weeks this contribution stopped, so Sally started to draw on her savings to meet the full cost. Next, her house was sold. The sale proceeds, together with her remaining savings totaled £200,000. By taking her combined income from her private pension, state pension and Attendance Allowance, it left care home fees of £380 week paid from her savings.
At that rate, her savings would be completely exhausted in about nine years. In addition, there was the issue of rising care home fees.
Sally’s personal needs
Sally's daughter knew that her mother's financial independence was very important to her.
She didn't want her mother to live off state benefits and have the quality of her care dictated to her. But she was also worried that her mother's limited financial resources would run out.
At first sight, her personal needs and financial situation didn’t match up.
How an Immediate Lifetime Care plan met Sally’s needs
Sally's financial adviser recommended the following course of action in four simple steps:
How the recommendation worked
The recommendation addressed Sally's daughter’s principal concerns. It ensured that a proportion of the care fees would be met for the rest of Sally’s life and provided a financial legacy for her descendants.
- Care costs: these were met from Sally's State Attendance Allowance, Registered Nursing Care Contribution
(RNCC), pension income and the payments from her Immediate Lifetime Care plan.
- Tax: Sally paid no income tax because her pensions were set against her personal allowance. The state Attendance Allowance is currently tax free and payments from the Immediate Lifetime Care plan were tax free because they were paid to a registered care provider.
- Nursing care: the RNCC payment went directly to the care home.
This scenario is for illustrative purposes only. Depending on your client’s circumstances it may not be possible to meet all of their needs and therefore leaving a legacy and paying for the cost of care may not be fulfilled.