|
Eleanor Haillay
Age 60
Lives in Sherborne, Dorset
Occupation Semi-retired nurse
Earns approximately ?13,000
Mortgage None
Debts None
Pensions Currently drawing NHS pension
Aim To find a way of safeguarding the family home so
that it can be passed to her three children instead of
being used to pay for any long-term care
Eleanor loves nursing. She started more than 40 years ago and, with the exception of a gap when her children were young, she has nursed ever since. She has now retired but still nurses part-time at a local GP's surgery and does occasional shifts at the hospital where she used to be employed.
When she officially retired, as a sister in the minor injuries and outpatients unit, in September 1999, the NHS provided her with access to an independent financial adviser for advice on investing her retirement lump sum. She placed £10,000 in a Clerical Medical With Profits Bond, £9,000 in a Sun Life Flexible Bond and £3,000 in a NPI Global Care Isa. She is not taking any income from these investments but may need to when she stops working part-time, probably when she reaches 65.
Eleanor doesn't expect her husband, Peter, a self-employed graphic designer, to receive much of a pension. The only other investments they have are £3,000 in a joint account at Bristol & West, and a cash Isa in her husband's name.
Her main concern is for her three children, aged 28 to 35. 'None is earning sufficient to provide any future security', she says. She would like to be sure that they will inherit the family home, worth about £180,000.
Eleanor is not sure whether it would be best to take out long-term care insurance, or if there is any other way she and Peter can safeguard their property from being used to pay for any long-term care they may need. She believes they would be able to afford the premiums until they reach 65 at least, and says their children would help with premiums thereafter.
Other possibilities are to hand the house to their children now, or to draw up a five-way trust to reduce the likelihood of the house being used to fund any care.
Adviser 1: Sharon Linnard
Eleanor will need to think carefully before
taking out insurance against the possibility of
requiring long- term care. If it is to be funded on a
monthly premium basis, a benefit of ?10,000 a
year - even allowing a waiting period of 13 weeks
before it becomes payable - is likely to cost
?50-?60 a month each for her and her husband.
It seems unlikely that this can comfortably be met
out of income. Regular withdrawals could be
made from the Clerical Medical and Sun Life
bonds to meet the cost, but this would stunt, if not
extinguish, all growth from investments which
were intended to supplement retirement income.
Under the current rules, provided only one spouse
requires long-term care and the other remains
living in the house, its value is not taken into
account. If the need for long-term care arises after
the first death, the house has to be disposed of, or
the cost is treated as a debt which has to be
extinguished when the property is finally sold.
However, it is proposed that, from October this
year the state will pick up the cost of nursing
care.
It is worth exploring the possibility of putting the
house in trust now as, if this action is deferred
until long-term care is needed, it is almost certain
that it would be seen as a deliberate attempt to
avoid an imminent cost.
However, a better way of helping the children
may be to contribute to pension policies in their
own names under the new stakeholder-type
contracts, which will become available from
April.
Sharon Linnard works for chartered accountant
KPMG.
Adviser 2: Gordon Wilson
Eleanor's concern is one shared by an
increasing number of people as they approach
retirement. There is no easy solution. She could
take out an insurance policy, but policies of this
type are quite expensive. I think it is a good idea
for the children to contribute towards the cost, as
it is they who stand to benefit. But they could be
paying for something that may never be needed.
If Eleanor uses a trust in the hope of avoiding the
house being included in any means assessment, I
would expect a local authority to challenge this.
Similar cases have gone to court and local
authorities have enjoyed a great deal of success.
Gifting of assets of any type, including savings
and investments, to avoid paying care costs is a
high-risk strategy. A common misconception is
that there is some kind of time limit, so that
provided the gift is made, say, two, three or seven
years prior to care being needed, it will be
successful.
This is not the case. Local authorities can look
into your financial history as far back as they
choose and again could argue that you had
deliberately deprived yourself of assets - in which
case you will be asked to pay the care costs
regardless.
Fortunately, the Government's position would
appear to be softening slightly on the long-term
care issue. It is expected that it will start to pay
for nursing care from October this year, although
the details are sketchy and it is not clear what this
will amount to.
Gordon Wilson works for financial adviser
Thomson & Shepherd Investors.
Advice is for guidance only.
• Do you want to appear in Wealthcheck? Write,
including daytime and evening telephone
numbers, a brief list of circumstances and any
investments, to: Wealthcheck, The Observer, 119
Farringdon Road, London EC1R 3ER, or
e-mail: cash@observer.co.uk. You must be
prepared to be interviewed and photographed.
|
Latest press releases 
