Options for Meeting Your Care Costs
When calculating how much you will be expected to contribute to the cost of your care, it is first necessary to determine what help maybe available from the state or other sources.
Determining Your Capital And Income Needs
If you need to pay for long-term care immediately, or in the near future, you are likely to have to change your investment portfolio to meet the increased expenditure involved. You will need to assess your financial objectives in order to understand:
- Your income requirements now and in the future.
- The length of time the income will be needed.
- The capital available and the form in which it is currently available.
- Any tax issues.
Sources Of Funds To Meet Long-Term Care Needs
You should carefully consider the sources of funds you have available that can be used to meet your long-term care needs.
You can plan for possible care fees by building up you savings and investments. If you require long-term care later in life, you are likely to need to review your existing investments to produce more income
You may also consider disposing of investments to purchase an immediate needs annuity.
Any review of an existing portfolio needs to take account of Capital Gains Tax on disposals of existing assets and should aim to maximise any available income by using tax efficient investment strategies.
A registered pension arrangement is a tax-efficient long-term savings vehicle that is designed to produce capital and/or income for your retirement. Provided sufficient funds have been built up by retirement, you may be able to keep pension funds uncrystallised and then release new tranches of tax-free cash and additional income if you need long-term care.
Selling Capital Assets
It is common for capital assets to be sold to pay for care and the capital asset that is often sold is the home:
Many people have significant equity in their homes, so selling your home to pay for residential care is often a consideration.
Letting Your Home To Pay For Long Term Care
Letting the home could be an option if the capital is not required, and gross property yields can be higher than equities, fixed interest investments or cash deposits. However, yields may not work out to be much higher once account depreciation, management and other associated costs of owning and letting property are taken into account.
You should also remember that tax would be payable on these returns.
If you are considering letting your home, you should look at this website produces regular surveys of rental returns The Association of Residential Letting Agents.
Is Your Home Suitable For Letting?
Homes that have been owned by the same occupants for many years may not be suitable for letting because they require improvements such as
- Safety upgrades – for electricity cabling, etc
- Updates to bathrooms and kitchens, etc