There is no rehearsal for the time when a family member needs long term care. Sometimes this is just on domiciliary basis but, if the person needs more than just basic help, these needs cannot be met without residential or nursing care. It is at this point that any hopes that person may have held of leaving an inheritance for their loved ones disappears when faced with prospect of having to sell their home to meet average yearly bills of over thirty thousand pounds to pay for their care.

It is important to remember at this point that individuals will not qualify for free care if they have assets, including their home, above 23,000 in England and Northern Ireland, twenty two thousan pounds in Wales and twenty two thousand five hundred pounds in Scotland. People usually have to pay for their own care as they are above the local authority funding limits (Tax year 09/10). There are some exceptions to these rules, but they are limited for everyone else. The next port of call would be to seek help from charitable sources but this is unlikely to be a permanent solution as charities have restricted funds.

A care fees annuity - otherwise known as an Immediate Needs Annuity(INA) is a very effective way of planning for the future costs of care fees. The lump sum premium is determined by how old a person is, if they are mail or femail and their health condition. Underwriting is done by receipt of medical information from a client’s doctor and the care home. The greater the degree of frailty and illness, the lower the premium as the cost as is dependent upon the insurance company’s view on the person’s expected longevity.

Care fees Plansare a very effective way of protecting a family’s estate against the danger of care fees running away with future inheritances. They allow a family to plan for the expenditure needed then plan for the future with confidence.

Although the lump sum premium does not qualify for tax relief, as long at the monthly payments are made directly to a registered care provider, they are paid tax free and do not affect the tax position of the person receiving the care. (To be a registered care provider, they must be registered with the Care Quality Commission).These plans are flexible as well as tax-efficient as, should the person no longer need long term care, the net payments can be paid directly to the person with tax deducted at 20% by the annuity provider. although this tax applies only to a fraction of the payments.

Care fees annuities are also a very good way of reducing any liabilities to inheritance tax because the cost of the annuity excluding any capital protection costs can be deducted from the estate. This is a very effective way of gaining a 40% discounted premium on the price of the plan that is being arranged to meet the known future costs of care.

By using this method to protect a family’s wealth, the following aims have been achieved:-

Any remaining monies are preserved for the estate and the person receiving care can achieve their wish to leave an inheritance.

The costs of care have been ring-fenced. Also the person in care has certainty of their care and retains their dignity and choice in the matter.

The capital amount is at its lowest when the lump sum has been paid. Once this has been done, all future costs to the amount covered by the premium paid, are covered, thus giving any monies the chance to regenerate the estate.

It is so important that families use the skills of an expert financial planner who has experience in dealing with long term care so that they ensure that they receive correct advice, as this is one time when making the right decisions really can make all the difference to a family’s future.

Before you consider a long term care annuity plan that can safeguard against huge care fees simply access your remarkable free article written by barbara Davies, CEO of equityCare