In our last two newsletters, you may have read articles related to different aspects of financial planning for your parents.
First, we looked at how and when you might want to consider taking control of your parents finances, and considered some of the key issues in this regard, such as paperwork and their living arrangements.
Then last month we focussed on aspects of their estate planning arrangements, including the importance of you assessing their Inheritance Tax (IHT) liability, and the potential gifting of assets.
Now, in the third of this series, read about how you may want to consider their plans for when they may no longer be fit enough to look after themselves, particularly, care arrangements, and the cost of residential care.
Potential care requirements is an important issue to address
In the previous articles, we made the point that you may feel inhibited when talking to your parents about emotive and sensitive issues such as their personal finances and estate.
We totally agree that conversations about financial and later-life arrangements can be awkward, and you – and they – may be tempted to avoid them, or only speak very superficially.
The same inhibitions could easily apply with this third article, as care arrangements in particular, can often be difficult for your parents to face up to.
After all, they may currently be in good health and have justifiable plans to live independently for the rest of their days.
However, it is an important issue to broach, especially as care provision may be required at relatively short notice. Furthermore, with figures suggest the average cost of a care home is on the rise, some advance planning could stand you all in good stead.
The average nursing care home cost now exceeds £60,000 a year
According to 2023 figures published by interactive investor, the average cost of a care home in the UK has increased by 10% compared to 2022.
The figures confirm that an average nursing home will now cost £1,176 a week, equating to £61,152 a year.
Although some financial help may be available, in most cases they will need to contribute a substantial percentage towards their own care costs.
You may well have read about a government plan to introduce a lifetime cap on care costs in the future, with the figure of £86,000 being suggested.
However, it’s important to note:
- This cap would only cover care costs, not other expenses like accommodation, utility bills, or entertainment.
- With an election on the horizon, there’s a lot of uncertainty around the financial aspects of future care provision.
Residential care may not be the only option available
You may find that your parents are resistant to the idea of moving into a care home at any stage in the future.
Indeed, a report from Just Group indicated that among over-75s, just 29% said they would be happy to go to a care home if needed.
While costs can be challenging, and concerning, it’s important that you and they appreciate that residential care is not the only option on the table.
For example, in many instances, a domiciliary care package may be perfectly suitable for their needs, both in terms of affordability but also with the big added advantage of them staying in the familiar surroundings of their own home.
In these circumstances, however, you may need to factor in the potential cost of any alterations needed to their current property, such as a downstairs bathroom and easier access.
Another option, which will help them retain an independent lifestyle, is for them to consider downsizing to a smaller, more accessible property such as a bungalow or supported-living retirement flat.
Indeed, a mix of these options, such as a retirement flat with on-site care support, may prove both viable and attractive.
There may be a geographic divide that will need to be addressed
We are well aware that many of our clients are expats or at least internationally mobile.
As a result, you may be in the situation where you are living overseas while your parents are in the UK.
Clearly, if this is the case, you should be looking to factor this into your decision making.
For example, if you are an only child, you may need to return to UK, either for a short period or maybe even permanently, if your parents end up needing care arrangements. This could have adverse implications with regard to your immediate tax position as well as your domicile.
Even if you have other family members living in the UK, you will need to take their circumstances into account before assuming that they will be able to provide the necessary level of support that your parents may need.
It’s important that you consider every potential eventuality and have at least an outline idea of the financial and logistical implications.
You will need to assess the cost of various options
With their preferences set out, you can start to assess the costs of the various options that may be available, and desirable.
While average care home figures offer a useful guideline, prices can vary significantly depending on your location and the type of care your parents may require.
It’s also worth getting an idea of various domiciliary packages to help you plan ahead.
Various types of care funding doesn’t necessarily require an immediate big financial outlay. So, depending on their circumstances, other assets or a combination of assets could be divested to provide the necessary ongoing funding.
You could also start assessing the cost of your parents move to a different property, taking into account the current value of their existing home, moving costs, and the amount required for various alternative options.
Get in touch
If you would like to talk to us about any aspects of your parents’ financial planning, please get in touch.
You can contact us by email or, if you prefer to speak to us, you can reach us in the UK on +44 (0) 208 0044900 or in Hong Kong on +852 39039004.
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