Why elderly care is an issue for all ages to consider

When it comes to long-term care for the elderly, you may think it’s a matter that only affects older people in need of care and their children, who are likely to be in their 50s or 60s themselves.

However, the reality is that it can have serious consequences for people of all ages in a family – not least because the high costs involved can eat into any inheritance that an elderly person might be hoping to pass on to younger generations. This is particularly likely if the person suffers from Alzheimer’s or another form of dementia, as it can cause the care costs to rocket.

For example, the average cost for residential care in the UK is around £35,000 per year, rising to just under £50,000 for specialist dementia care.2

So, in support of World Alzheimer’s Month, here’s our guidance on what all generations should consider when planning for later life and possible care needs.

Planning for a longer life

One of the main issues that we need to confront is that people are now living for longer, says Tony Clark, Senior Propositions Manager at St. James’s Place. This, he explains, has several consequences.

Firstly, it means that the age at which people might receive an inheritance is changing. Although it’s generally happening later in life, some older people are now considering where those assets can be of most use in a family and are choosing to skip a generation by passing their wealth directly to grandchildren. 

And, secondly, it means that many of us who do live for longer will be more likely to need care in future – perhaps to the age of 100 and beyond.

“The result,” says Tony, “is that without careful thought and planning, care fees could completely erode all of those intentions of passing down an inheritance.”

It’s also important to remember that the care-fees cap, which the UK government is planning to introduce in England in October 2023, won’t necessarily solve this problem. “Even with the cap coming in, there’s likely to be a substantial cost, which you’d need to find the money for,” says Tony. 

How do you start a long-term care plan?

The upshot of all this, says Tony, is that people should start planning for a range of scenarios at an earlier stage in their lives – and, wherever possible, from an intergenerational point of view.

“There are so many moving parts that the planning needs to come sooner than people might have previously anticipated – even though the outcomes and the actions might come later than before,” he says.

“The idea of passing on a legacy is, for many people, one of their key areas of planning, particularly as they get older. But I think we need that injection of reality at an early stage. If you don’t do that, things tend to derail.”

A first step is to initiate a conversation across the generations in the family. This can often be difficult and feel awkward, with emotions frequently coming to the fore – therefore, professional advice from a financial planner can be invaluable. 

“By their very nature, those family money conversations are emotive, and a lot of feelings need to be considered,” says Tony. “That's where an adviser can help. They can bring the parties together, try to look at where the common ground is and help with understanding the purpose of the money and possible future priorities for that money.”

You should also ensure there’s a power of attorney in place – preferably as soon as you start your financial planning. This means someone you trust will be able to make decisions on your behalf, concerning property, financial affairs and health and wellbeing, if you’re no longer able to – for example, if you begin to suffer from dementia. 

Can I avoid paying for care by giving away my assets?

Tony adds a warning about ‘deprivation of assets’. This is when someone might give all their assets to other family members in an attempt to reduce their level of wealth below the means-tested threshold in order to qualify for local-authority funding.

If the authorities spot that you’ve done it, they’ll treat the assets as if you still hold them yourself – meaning that you’ll still be liable to pay your own care fees. “It’s a lose-lose situation,” says Tony. “Anyone who thinks they can do a bit of manoeuvring like that is likely to come unstuck.”

However, there’s still the option of using your tax-free gifting allowances to pass on some of your wealth to your loved ones before you die. You can give away up to £3,000 per year, which will be exempt from Inheritance Tax. 

The questions to ask, says Tony, are: “Is that capital going to be needed to fund care? If so, how much might be left that can be passed on?”

Keeping wellbeing top of mind

Whatever your circumstances, considering the wellbeing of everyone concerned is of paramount importance, stresses Tony. 

“Having a sound financial plan in place – and keeping the lines of communication between the generations as clear as possible – can help to remove a lot of the stress and allow you to focus on the things that matter most to you,” he says.

To find out more about intergenerational considerations when it comes to later-life planning, speak to us. We can also put you in touch with our partners at Care Sourcer, who have an extensive knowledge of the UK’s care systems and will help with arranging the right long-term care for you or a loved one.

Advice given in relation to a Power of Attorney and from Care Sourcer will involve the referral to a service that is separate and distinct to those offered by St. James's Place. Powers of Attorney are not regulated by the Financial Conduct Authority.

Members of the St. James’s Place Partnership in the UK represent St. James’s Place Wealth Management plc, which is authorised and regulated by the Financial Conduct Authority.
St. James’s Place Wealth Management plc Registered Office: St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP.

Registered in England Number 4113955.

Sources:

^1,2 Care Homes for Older People UK Market Report, 32nd Edition, LaingBuisson, March 2022