Financial steps to prepare for dementia challenge

Charles Calkin, partner and financial planning consultant

Close to 850,000 people in the UK suffer from dementia and the figure is set to rise to two million by 2050. It’s a daunting prospect but you can plan ahead and mitigate some of the problems you might encounter if you’re unfortunate to have to grapple with the effects of dementia.

Prepare for dementia challenge

There are two key challenges – funding care and ensuring someone trustworthy is managing your affairs when it becomes too much of a struggle for you.

Funding dementia care

The first financial planning priority has always been to achieve financial independence, with a home fully paid for and the resources in place to fund retirement. Increasingly now we also have to think about including contingencies for later life care, which may include dementia care.

In the early stages of illness, a spouse , civil partner or family member will typically take on the role of carer. However, the dementia sufferer may eventually require full-time care. Preparing for this scenario and leaving a generous provision to cover care home fees will alleviate potential stresses surrounding the process.

Care costs will come down to the treatments that are required, the type of care home selected and the duration spent in the home itself. Where you live will have an influence too. Which? reports wide-ranging differences between regions, with nursing care costing £666 a week in the North East compared with £1,041 a week in the South East. The Alzheimer’s Society estimates that the average annual cost per person in residential care is £31,000 for someone in the mild stages of dementia and £37,000 in the severe stages. But I have clients who are paying £90,000 to £120,000 a year for care.

Typically, we encourage clients to budget for three years of later life care, but with dementia you can survive much longer than that. It sounds cynical but care homes have a vested interest in keeping you alive as long as possible.

Your local authority may pay for part or all of the costs of care but expect means testing and limits to how much they will contribute.

If you live in England and have assets of more than £23,250 (or £27,250 in Scotland and £40,000 in Wales) you will be responsible for paying for all your own care costs . Your house will be included in the means testing, unless you have a “qualifying relative” (such as a spouse or civil partner ) living there too. For couples, only the share of the assets owned by the person with dementia are taken into account. If you have under £14,250 you will be eligible for the maximum support but are still likely to have to make contributions from your income. As with all financial planning, taxation rules are subject to change – as are your personal circumstances – so it is important to review your situation regularly.

Understanding potential care costs and planning for them is crucial. In turn, this is likely to bring another question to the fore: should you sell your property or downsize to free up capital for the quality of care you want? The earlier you think about this, the better. The answer will depend on the size of your pension and income stream, and whether the healthy spouse or civil partner wishes to continue living in the property. If you don’t wish to sell your home, equity release could represent an option.

Many older people see the family home as an asset for the next generation. It is understandable to want to protect it but signing it away is risky. First, you lose control of the asset and could find yourself regretting the decision. Second, if the local authority concludes you have intentionally reduced your assets (money, property or income) to avoid them being included in your financial assessment for care home fees, this could be seen as “deprivation of assets” and they may decide to calculate your fees as if you still owned them.

Trusted support managing your affairs

One of the difficulties with dementia is that loss of capacity makes it difficult to make a will or sign powers of attorney, so it is important to think about these early, while you are still well enough. A Lasting Power of Attorney (LPA) is a legal document by which you appoint one or multiple ‘attorneys’ to make decisions on your behalf, should you lose mental capacity. There are two kinds of LPA – one to cover property and finances and the other to take responsibility for health and welfare. It costs £82 to apply to the Office of the Public Guardian to register each LPA for each person (so for a couple you might have four different documents to complete). Those with lower incomes may pay less or have the fees waived.

If no Lasting or Enduring Power of Attorney (set up before October 2007) has been registered, loved ones have to apply to the Court of Protection for deputyship once the dementia sufferer loses capacity. This can be a long and stressful process, which can be easily avoided by planning ahead.

While considering LPAs it is also worth ensuring your will is up to date, preferably under the supervision of a solicitor. I can’t begin to stress the benefits of making a will in good time, before the loss of mental capacity. It can minimise family feuds, ensure wishes are met after death and reduce stress for friends and family. Writing an accompanying ‘expression of wishes’ or ‘letter of intent’ allows an individual to clarify funeral preferences and to provide further detail about who they wish to give personal belongings to.

Good financial housekeeping

Beyond these two important legal steps, there are a number of simple housekeeping points that can reduce sources of stress for carers. If you are married or in a civil partnership , make sure properties, bank accounts and other assets are held on a joint-basis if appropriate . This can avoid the carer spouse or civil partner having to grapple with the building society for simple things, like permission to set up a standing order, or to prevent their loved one from paying bills repeatedly.

Providing your spouse , civil partner or family members with a list of passwords, as well as key contacts and advisers, will also make their life easier.

The steps I have outlined to prepare for dementia can go some way towards minimising the stresses that sufferers and their families face each day.

Posted 22 May 2018

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