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.

The current position is that people have to fund the costs of their care if they have assets including their home, above 23,000 in England and Northern Ireland, 22,000 in Wales and 22,500 in Scotland. There are some exceptions to these rules but these are very limited in scope and the move most people make next is to investigate any help available from local charities but this is usually on a temporary basis as charity resources are limited.

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.

Care fees policies help protect a family\’s wealth because, when future costs have been assessed and catered for plus a good margin for any unexpected events, it means that the rest of the family\’s wealth is there to become an inheritance for the family members left a legacy in the Will, instead of being eaten up by care home fees.

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.

If there is an inheritance tax liability, the purchase of an immediate needs care annuity can also be a very tax efficient way of reducing this liability as the cost excluding any capital protection can be deducted from the estate – effectively purchasing the means to pay for the care with a forty percent discount.

Using this strategy to plan for care enables a family to meet the following aims:-

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.

Any remaining monies are preserved for the estate and the person receiving care can achieve their wish to leave an inheritance. The costs of care have been dealt with thus protecting the balance of assets.

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.

It is so important that families use the skills of an expert financial planner who has experience in dealing with long term care so that they ensure that they receive correct advice, as this is one time when making the right decisions really can make all the difference to a family\’s future.

Before you implement a long term care annuity plan that can protect against huge care costs simply access your remarkable free information written by barbara Davies, CEO of equityCare