It seems that as a nation we are woefully under prepared for our future, particularly when it comes to later in retirement and potential social care. It’s not something we like to consider and we think we have time to plan for. But amongst you client base, how many of your clients are preparing for retirement or in retirement with no plans for funding social care?
According to research by Association of British Insurers (ABI) we are unprepared for this stage of our life, supported by a lack of understanding of what could happen to us financially and our options. With the number of over-75’s set to double over the next 40 years then the implication for lack of social care preparation could be huge.
The insurers said that incentives for social care should be targeted at those who have savings of more than the means test threshold (£23,250), but less than £200,000 – this group makes up approximately 37% of people in England aged over 50.
Within that target group, the majority (90%) aged 65 to 79 have paid off their mortgage and own their own home and 50% of these have over £300,000 tied up in their home’s value.
51% of people saw the state pension as the most likely source of funding to pay for care, with only 17% saying insurance and 26% saying they would sell their home. The findings saw that 26% would sell their home to pay for the social care.
In a previous BTWC blog we have looked at the implications of selling the home to pay for care when we are older, and the impact financially, on the remaining spouse or partner and the rest of the family.
Property Protection Trusts
When planned in time and implemented properly a Property Protection Trust can help ensure all parties are looked after.
A property protection trust is created for many purposes, one of which is to help clients protect their share in a property in the future.
A lot of people have their money tied up in their house. A property protection trust is designed to protect the home from being included in assessments that are carried out to determine how much should be contribute to long-term care fees if a surviving spouse/partner was to go into care.
It is important to note that such a trust should not be set up only to manage care fee contributions but as part of wider planning for the future.
A PPT can protect the property so it can be used by the surviving partner for their benefit during lifetime as they are life tenants in the property so each partners half is protected from any assessment and it is then given to the ultimate beneficiaries as intended upon the second death.
How does a Property Protection Trust work?
Both members of the couple make a Will leave their share of the property into a PPT that is set up within the Will.
When either partner passes away, their share of the property will be put into a trust. The trust is included in the Will and would be managed by appointed Trustees. Should the surviving partner then require residential care only their share of the property could be used to fund it thus protecting a good chunk of any beneficiary’s inheritance.
When the surviving partner passes away, the trust ends and the share in the property goes to the chosen beneficiaries.
Lasting Powers of Attorney
When looking at possible social care scenarios it’s also important to think of implementing a Lasting Power of Attorney – as long this is early on so there is no dispute around mental capacity of the client. An LPA helps ensure that chosen attorneys are put in place to make key decisions around health and financial affairs should the client be unable to so do.
This means the client has trust in the chosen attorney to make the best decisions in their interest, rather than a court getting involved, it costing money, taking time and delivering possible decisions that are not suited to the individual.
We have created this downloadable scenario to use with clients to help explain how a PPT can work – click here.
Why later life planning is also end of life planning
Later Life Planning needs to consider a multitude of aspects, not just pensions, insurance and healthcare, but Later Life Planning is also end of life planning. As much as people do not wish to talk about the subject of Wills, Lasting Powers of Attorney and Trusts, each are just as vital in helping to ensure wishes are carried out and hard earned assets and properties are not ‘lost’ in the system, ending up where they don’t belong.
There are a number of ways to plan and protect clients, their families and their property and assets for this stage later in life, and by planning earlier on, with foresight, the right guidance and support, then the client can be safe in the knowledge they have done what they can and for the right reasons.