WOULD you know what to do if your elderly parents suddenly became unable to cope? Probably not.
Letters from readers show that people dread their parents turning from competent adults into dependent beings. Their fears were further fuelled this week after a report from the Office of Fair Trading found that elderly people are forced to decipher a “maze” of rules about care homes. The report found that the information and advice from care homes and local authorities lacked consistency and clarity.
The complexity of the system, and fear of the future, is preventing otherwise prudent middle-aged people from planning for the worst. Here we answer the most common questions posed by readers who are concerned about their parents’ future.
I am concerned that my parents are becoming increasingly frail and forgetful. How can we prepare for the future?
Hopefully, your parents’ faculties will not deteriorate further, but while they are still of sound mind they could give you an enduring power of attorney (EPA).
Mike Warburton, of Grant Thornton, the accountancy firm, says: “An EPA gives you the power to deal with your parents’ financial affairs. It starts immediately and continues if they become mentally incapable, provided that you register the EPA with the Public Guardianship Office. If an EPA has not been set up, you must apply to the Court of Protection for a ‘receivership’, which can be a minefield.”
Peter Nellist, of Clarke Willmott, a firm of solicitors, says that the new concept of lasting power of attorney (LPA), introduced in the recent Mental Incapacity Act, will enable the powers of attorney to be extended to cover health and social care, as well as financial issues. However, LPAs are unlikely to be in place before 2007.
My father is caring for my mother, but I am not sure how long he will be able to cope. What can I do to help?
Contact their local social services and ask for a “needs assessment”. This will take into account the needs of the carer as well as the person being cared for. Everyone is entitled to an assessment regardless of their means.
If professional care is recommended, then who pays will depend on your parents’ financial position. If their capital is less than £20,500, they should be entitled to some financial support. If it is below £12,500, they will be entitled to maximum support.
In the meantime, apply for the attendance allowance.
This is a non-taxable allowance that is not means-tested and is given to those needing care by day, night or both.
How will my parents’ means be assessed?
If one parent requires care, only that person’s means will be taken into account. Property, if occupied by your other parent, will be disregarded and only half of any private pension and joint savings will be counted.
Philip Spiers, of NHFA, the specialist care fee advisers, recommends that joint savings accounts should be separated. There would then be less in your mother’s account and she will gain state assistance as early as possible.
Mr Spiers also suggests that your parents change the ownership of their property to “tenants in common”. If your father should die first, his half of the home can be left to beneficiaries rather than going into the pot to pay for the cost of your mother’s care.
My widowed mother is finding it difficult to cope alone, but if she needs care she would prefer to stay in her own home. We are considering using an equity release scheme to pay for her care, but what would happen if she subsequently needed residential care?
An equity release scheme is a loan against the value of a property. When the property is sold, the loan is repaid from the proceeds.
However, early redemption penalties are usually waived if someone moves into residential care. Money raised from the equity could buy an immediate-need care-fees annuity — also known as an impaired life annuity — to help to cover the cost of care in the home. This could be transferred to a care home if she needs residential care.
My mother is about to move into a care home. The cost of this will be paid from the sale of her home. Will the local authority give her any help to tide her over until she can sell the property?
Mr Spiers says that the local authority must disregard the value of your mother’s property for the first 12 weeks of residential care. After that, it can “lend” her the money to pay for her care through a “deferred payments agreement” and recover the money when her property is eventually sold.
When the money becomes available how should I invest it to pay her fees?
There is no simple answer to this because it is often difficult to know how long care will be required. If you put it all on deposit, there is naturally the risk that the money will run out if your mother remains in care for a long time.
Mr Nellist suggests that you consider buying an impaired life annuities plan. Such plans will make guaranteed payments for the remainder of your mother’s life. It is a way of helping to limit the total cost of care, which enables the remaining capital to be invested elsewhere and eventually left to the family.
There are four main providers of impaired life annuities — AXA, Norwich Union, GE Life and the
Pension Annuity Friendly Society. You must check with all four to make sure that you receive the best deal. You also need to find out what will happen to the money from the annuity if your mother becomes eligible for NHS continuing care and no longer needs to pay for her own care.
Can I carry out inheritance tax (IHT) planning for my mother now that I have enduring power of attorney?
Mr Warburton says: “Making use of your mother’s annual IHT allowances should not be a problem, but if you made large lifetime gifts which deprived her of capital that could otherwise be used to pay fees for a care home, you might get into trouble with your local authority.”
When will the NHS pay the full cost of care?
In theory, if your mother requires mainly healthcare, rather than “social” care, such as help with dressing and washing, she should qualify for NHS continuing care.
In practice, however, the distinction between health and social care is blurred. Whether someone is considered eligible for NHS continuing care often depends on where they live.
If you think that your mother may be eligible, contact the local Primary Care Trust and ask for a review of her care needs against the continuing care criteria.
My 83-year-old widowed mother is selling her home to come to live with me. She does not need professional care, but she may in the future. How should the proceeds of her property be invested in the meantime?
This will depend on a number of factors, such as whether your mother requires an income from her capital. If you want to keep it safe and easily accessible, Mr Nellist believes that index-linked certificates from National Savings & Investments are ideal for elderly people because they are totally secure and the returns are linked to inflation.
Mr Spiers says that there could be an advantage in placing your mother’s money in a life assurance investment bond because if she requires care in the future it will not then be taken into account for means-testing.
He says: “Life assurance policies are disregarded even when there is only a small element of life assurance, as with investment bonds.”
Where can I go for advice about my elderly parents’ financial affairs?
You need to enlist the services of an independent financial adviser which has the right expertise.
Organisations such as IFA Care, the members of which have to attend training days and keep up to date with long-term care issues, can supply names of members in your locality.
