Chapter 2.8 Long term Care Protection

Financial Protection: Long-Term Care

Understanding Long-Term Care Needs

  • Long-term care primarily focuses on individuals who are elderly or suffer from physical or mental disabilities.

  • Support needed for activities of daily living (ADLs) includes:

    • Assistance with dressing, washing, meals, shopping, etc.

    • Care within one's home or in a residential setting.

Political Environment and Legislation

  • Care Act 2014: Essential legislation to discuss, aiming at:

    • Encouraging independence and well-being of individuals needing support.

    • Giving individuals greater control over their care.

    • Laying out cost calculation processes for care, identifying state vs individual funding responsibilities.

  • Mental Capacity Act 2005: Protects individuals lacking capacity to make decisions due to conditions like Alzheimer's or brain injuries.

    • All care professionals must comply.

    • Emphasizes principles around presumption of capacity, decision support, and best interest decisions.

Key Steps in the Long-Term Care Assessment Process

  1. Care Needs Assessment (CNA):

    • Local authority conducts this, utilizing professionals (doctors, social workers, etc.) to determine specific care needs.

  2. Care Plan Creation:

    • Outlines the delivery method for care based on specific needs.

  3. Cost Calculation:

    • Establishes the overall cost of care detailed in the care plan.

  4. Financial Assessment:

    • Evaluates individual income and capital to ascertain how care costs are shared between the individual and the state.

    • Income and Capital Limits: If individual capital exceeds £23,250, they must liquidate assets to cover costs before state assistance kicks in.

    • A portion of income is allowable for personal expenses (approx. £25/week).

The Role of Financial Planners

  • Financial planners assess and recommend how to efficiently finance care needs.

  • Guidance on which assets to liquidate and reinvestment options to secure necessary income for ongoing care.

Variations in Care Systems Across the UK

  • Note the differences in social care systems for Scotland, Wales, and Northern Ireland, which are not part of the syllabus.

State Assistance and Benefits

  • Recognize limited means-tested state assistance options:

    • Attendance Allowance: Small income for severely disabled individuals.

    • NHS Continuing Healthcare: For those with severe conditions requiring complex care.

Financial Options for Long-Term Care

  • Selling Assets: Implications of liquidating assets to cover income shortfalls.

  • Investment Choices: Options to invest proceeds from asset sales or house sales can include:

    • Savings accounts (low risk, low returns, exposed to inflation risk).

    • Portfolios of shares and bonds (higher yield, capital risk).

    • Care Annuities: Provides lifelong coverage for care costs but has no residual value.

Deferred Payment Schemes

  • A financial scheme allowing individuals to remain in their homes, with the local authority covering care costs as an interest-free loan of equity in the home until it is sold.

Long-Term Care Insurance Policies (LTCI)

  • Provide income to cover long-term care needs, can be either immediate or pre-funded.

    • Immediate Care Annuities: Lump sum paid upfront to cover immediate care needs; requires health assessments.

    • Pre-funded Policies: Typically not available in the UK currently.

  • Different policies have varying requirements for trigger numbers of ADLs to qualify for payouts.

The Mental Capacity Act: Key Principles

  1. Presumption of Capacity: Everyone is presumed capable unless proven otherwise.

  2. Support for Decision Making: Assistance to help individuals make decisions.

  3. Right to Make Unwise Decisions: Individuals can make choices perceived as unwise.

  4. Best Interests: Actions taken must always consider the individual’s best interests.

  5. Least Restrictive Option: Minimize interference with individual rights.

Powers of Attorney

  • Ordinary Power of Attorney: Limited to a specific time and context, ceases with loss of mental capacity.

  • Lasting Power of Attorney (LPOA): Remains valid if the individual loses mental capacity; can be related to property/financial affairs or health/welfare decisions.

Equity Release Schemes

  • Two types:

    • Lifetime Mortgages: Loans secured against home equity to fund annuities for care.

    • Home Reversion Schemes: Selling a share in home for a lump sum to purchase an annuity.

Law, Regulations, and Conduct Risk

  • FSA and FCA Regulations: Protects consumers and ensures proper conduct in offering financial products related to long-term care.

  • Emphasis on understanding the impact of financial product interactions with state benefits and the necessity for heightened professionalism due to vulnerable clientele.

  • Conduct risk considerations: Strive to avoid conflicts, ensure dignified treatment of individuals accessing care services.