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Controlling the Costs of Long Term Care

By Mark Gregory on the 13th February 2014

Paying for long term care can be a very daunting prospect for many individuals and their families, especially since most average consumers do not have a clear understanding of how high these expenses can really get. Most individuals typically spend their lifetime saving money and building a nest egg to ensure that they are able to purchase everything they need once they reach their later years and are no longer working. Most consumers hope to pass on their savings and their assets down to their children and grandchildren. However, once it’s determined that long term care is needed, all of those dreams of a relaxed and affordable future can cease to exist.

There are ways to prevent becoming completely overwhelmed by the costs associated with long term care. Often, consumers are fairly confident that they are able to continue their lifestyle, as they most typically saved money throughout their working years. However, just a short term in care can really deplete a quite substantial savings account. Once this occurs, consumers and their families need to determine how to better control these costs. While this is difficult, it is entirely possible.

One of the first steps in controlling long term costs is to determine how much help may be available. While some consumers are faced with funding their own care, there are some options available for assistance with controlling costs. Each tier of help is directly related to the income and asset level of the individual consumer.

One of the best ways to try and control independent costs before they get entirely out of hand is to prepare planning for care costs long before there are any evident health concerns, regardless of how much financial assistance may become available. This really allows for better planning and a much wider array of options when it comes to choosing long term care. Consumers are urged to be as proactive as possible in their planning for their later years in life.

Many consumers have relied on the idea that the government would be issuing a cap, or a limit on the amount that a consumer can be required to contribute to their own long term care. This kind of cap would essentially help consumers to better plan for their care needs and would also help them to cover the rising cost of such care. However, the number of people who need assistance with their costs continues to rise, putting a great stress on the NHS. There is assistance available, but for many consumers, even those who have paid National Insurance their entire lives, contributions toward long term care will be required. This contribution applies whether the consumer stays in their home or moves on to a care home.

Many consumers find that they are forced to move to a cheaper home once they need to rely on their Local Authority to pay their bills. Local authorities have a maximum price that they will pay for a bed in a residential home in each area. If the consumer’s present home is more expensive, the consumer is forced to pay the additional costs or find a less expensive place to live.

In order to minimise the risk of this happening it is important to seek specialist financial advice in the early stages. One way of controlling the depletion of assets would be to purchase a Long Term Care Plan.

This type of plan is a form of enhanced annuity and each case is underwritten on an individual basis taking into account a full medical history. The aim of this plan is to provide a guaranteed income for the rest of the consumer’s life. A benefit of this type of scheme over a purchased life annuity is that income from the plan is paid tax free if paid directly to a registered care provider.

Because escalation can be built into the scheme the consumer can aim to cover any increase in their care costs. So for a one off payment the consumer can cover income needs and avoid any erosion of their assets.

While there are some options available to help offset the rising costs of long term care, including some financial assistance, consumers should be mindful that as costs continue to rise, the only real way to control cost is to plan ahead. Relying on help from the Local Authority or relying on the newly instituted cap may not be the answer to paying for all costs associated with long term care.

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Tags: Care Costs, Care Home, Care Provider, Costs of Long Term Care, Enhanced Annuity, Life Annuity, Local Authority, Long Term Care, Long Term Care Plan, National Insurance, NHS, Paying for Long Term Care, Purchased Life Annuity, Specialist Financial Advice, Annuity

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