Financial planning for care home costs

29 Sep 2020

Alison Maillardet-O'Neill

Investment Director

An alternative way to fund essential care

An issue we help many of our clients with is planning for all of their costs in later life. These costs will, of course, vary between clients, but a significant number of people are looking to fund residential care.

Covering care home costs

With the costs of nursing homes and care homes ever increasing, a common solution is for clients to sell their family home. While this can be an appropriate course of action, it’s crucial that the funds this generates are properly managed to last a lifetime.
 
The property sale proceeds are intended to fund a client’s lifestyle for years, if not decades. If these proceeds were simply placed on deposit, within a bank or building society account, the capital would soon be eroded due to the current very low interest rates and inflation. So, it’s important to look at other options.

Financial planning for property proceeds

At Investec we work with our clients, or their power of attorneys, to structure a plan to help cover the shortfall in their care costs by generating income above the current base rate, whilst enabling the capital to benefit from potential market growth.
 
Usually clients are elderly and a lower risk mandate is likely to be considered appropriate.  This relies on near cash assets to provide protection.  However, with bond yields being so low, one might argue that having almost 100% of your assets in one asset class could be deemed a higher risk strategy.
 
Our initial recommendation would be to retain cover for at least for 3 years’ worth of shortfall in care cost fees, then using the balance of funds to build a portfolio, including any other investment or cash assets the client may have, to provide a regular monthly income (from year 3 onwards) and for potential capital growth.
 
Of course, we offer a personalised solution based on each client’s specific situation, so you should always speak to an adviser about your exact situation.

About the author

To contact or read more about Alison Maillardet-O'Neill, visit her biography here.

Find out more

Whether you are looking to invest for the first time, or have an investment portfolio already, if you don’t know where to begin, or know exactly what you are looking for, we can help. Contact your local Investec experts in Edinburgh today, to discover how we can help you to fulfil your financial goals, and live life the way you want to.