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9 Ways to Fund Care: Exploring Your Options

Updated: Apr 11

When it comes to funding care, there are various options available to individuals and their families. Making the right decision requires careful consideration of personal circumstances, needs, and aspirations. In this article, we will explore nine different ways to pay for care, weighing the advantages and disadvantages of each option. Whether you're looking for immediate funding or planning for the future, this guide will help you navigate the complexities of financing your care.

 

1. DEFERRED PAYMENT SCHEME

A Deferred Payment Scheme is a popular choice for individuals who own their own property. This option allows you to defer paying your care fees until after your death, with the local authority covering the cost in the meantime. The fees are then recovered from the sale of your property or through other means, such as rental income. It provides peace of mind, ensuring that you can receive the care you need without having to sell your home immediately.


However, it's important to note that not all local authorities offer Deferred Payment Schemes, and there may be eligibility criteria to meet. Additionally, interest may be charged on the deferred amount, reducing the value of your estate over time.


2. RENTAL INCOME FROM RESIDENTIAL PROPERTY

If you own a residential property that is not your primary residence, you may consider renting it out to generate income to fund your care. This option can be particularly beneficial if you have a second home or an investment property. By leasing the property, you can receive a regular stream of rental income that can contribute towards your care costs.

It's essential to consider the potential risks and challenges associated with being a landlord, such as property management, tenant issues, and market fluctuations. Engaging a professional property management service can help alleviate these concerns and ensure a smooth rental experience.


3. EQUITY RELEASE FROM RESIDENTIAL PROPERTY

Equity release offers another avenue for funding your care. This option allows you to unlock the value tied up in your property without the need to move out. By taking out a loan secured against your home, you can receive a lump sum or regular payments to cover your care fees.

It's crucial to carefully consider the implications of equity release, as the loan will accrue interest over time, potentially reducing the inheritance you can leave behind. Seeking independent financial advice is essential to understand the long-term implications and find the best solution for your specific circumstances.


4. FUNDS RELEASED THROUGH THE SALE OF RESIDENTIAL PROPERTY/DOWNSIZING

For those who are willing to sell their property, downsizing can be a viable option for funding care. By moving to a smaller, more affordable property, you can release a substantial amount of capital to cover your care costs. The funds generated from the sale can be used to pay for care fees, ensuring financial stability.


Downsizing also offers the opportunity to simplify your living arrangements, potentially reducing maintenance and utility costs. However, it's important to carefully consider your future needs and ensure that the downsized property meets your requirements in terms of accessibility and proximity to support services.


5. LIQUID ASSETS/CASH/INCOME

If you have liquid assets, cash savings, or regular income, you can use these resources to fund your care. This option provides flexibility and control over your finances, allowing you to allocate funds as needed.


It's important to assess your income and expenses carefully to ensure that your resources can cover the cost of care in the long term. Additionally, considering potential future care fee increases and inflation is crucial to avoid financial strain down the line. Seeking financial advice can help you make informed decisions and create a sustainable financial plan.


6. INVESTMENTS/PORTFOLIOS

If you have investments or portfolios, you may be able to utilize them to fund your care. By liquidating some of your investments, you can access capital to cover your care fees. This option allows you to leverage your existing assets without the need to sell your property or make significant lifestyle changes.


However, it's important to carefully review your investment portfolio and assess the potential risks and returns. Seek advice from a financial advisor to ensure that your investment strategy aligns with your care funding goals and risk tolerance.


7. PENSION INCOME

For individuals with a pension income, this source can be used to pay for care fees. Regular pension payments can provide a reliable source of funding, ensuring that you can cover your care costs without depleting your other assets.


It's essential to review your pension plan and consider the impact of using your pension income for care funding. Assessing the long-term sustainability of your pension payments and potential future care fee increases is critical to ensure financial stability throughout your care journey.


8. LONG-TERM CARE INSURANCE PRODUCT (LTCI)

Long-Term Care Insurance (LTCI) is a specialized insurance product designed to cover the costs associated with long-term care, including residential care, nursing homes, and home care services. By paying regular premiums, you can secure financial protection against future care expenses.


Before purchasing an LTCI product, it's essential to carefully review the terms and conditions, coverage limits, and exclusions. Assessing your individual needs and comparing different insurance providers can help you find the most suitable LTCI product for your specific care requirements.


9. THIRD-PARTY TOP-UPS

In some cases, individuals may receive funding from a local authority but still require additional financial support to meet their care costs. Third-party top-ups offer a solution by allowing you or your family to contribute additional funds on top of the local authority's contribution.


It's important to consider the financial implications and sustainability of third-party top-ups. Assessing your ability to continue making contributions in the long term is crucial to avoid potential financial strain or disruptions in your care provision.


THINGS TO CONSIDER

When deciding on the most appropriate way to fund your care, there are several factors to consider:


Your Wishes and Family Considerations: Your personal preferences and family dynamics should be taken into account when making financial decisions related to care funding.


The Costs of Your Care and Potential Future Increases: Understanding the current and potential future costs of care is crucial to ensure that your chosen funding option can cover these expenses adequately.


The Level of Care Needed: Assessing your current and future care needs is essential to determine the amount of funding required.


Expenditure That Needs to Be Maintained: Consider any ongoing expenses that need to be maintained regardless of care needs, such as mortgage payments or financial commitments.


Your Attitude to Risk: Your risk tolerance and financial goals should guide your decision-making process when choosing a funding option.


Government Legislation and Local Authority Guidelines: Familiarize yourself with relevant legislation and local authority guidelines to understand your rights and obligations when it comes to care funding.


SEEKING FINANCIAL ADVICE

If you're unsure about which funding option is best suited to your circumstances, it's highly recommended to seek financial advice. A regulated financial adviser with specific expertise in care funding can provide personalized recommendations based on your needs and goals.


It's important to note that advisers with the specific care qualification are the only professionals authorized to advise on and recommend 'Immediate Needs Annuities' that guarantee to pay fees at any required level for as long as they are needed. Ensure that you work with a qualified professional who can guide you through the complexities of care funding and provide sound financial advice.


By considering the various funding options available and making informed decisions, you can ensure that you or your loved ones receive the necessary care without compromising your financial stability. Take the time to assess your needs, seek professional advice, and create a financial plan that aligns with your goals and aspirations.

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