With more and more people feeling the full force of the Credit Crunch, it is understandable that many families are trying to tighten their belts. For most, this involves putting off anything that they see as an “avoidable expense”. A recent survey has found that this list of “avoidable expenses” includes making a Will.

David Cooney, a partner in the Wills, trusts and tax team at Aaron and Partners, comments that, “a Will is something that many people put off for as long as possible, even when times are good. When families are feeling the financial strain, a Will may even seem like a luxury.” However, this approach may be short-sighted, cautions David: “if families do take proper advice and make a Will, the comparably small outlay now could actually protect the family’s assets in the future if, for example, long term care is required.”

Increasing numbers of people are requiring long term care, and for longer periods than ever before. This number is set to increase further as the average age of the population rises throughout England and Wales. The cost of long term care is also on the increase, having doubled over the last five years. Those costs are set to double again over the next twenty years. By 2028, the average cost of a four year stay in a care home will rise from £112,312 to £223,476, reports from analysts Laing and Buisson show.

In the next twenty years, the number of people aged over 85 in England and Wales is set to increase by two thirds. As we live longer, but not necessarily in a good state of health, more and more people are likely to require some form of long term care.

With the ever increasing costs of care, and the increasing number of people requiring this care, how will this be funded? Mark Reidford, a director of Innes Reid Independent Financial Advisers, notes that, “the funding of long term care is a very difficult question. Unfortunately there are no easy answers. The current situation is that anyone with the means to pay must pay for their own care.”

The rules are complicated and involve a financial assessment of the person requiring care. Income and capital are taken into account and the rules are then used to determine the level of the contribution that the resident needs to make to their care. If a resident does not have the means to pay then the local authority are responsible for providing the necessary care at no cost to the resident.

Mark Reidford goes on to comment that, “the financial assessment rules run to hundreds of pages. Contained within those pages are rules relating to ‘disregarded capital’. By understanding the ‘disregarded capital’ rules, it is possible to help clients to ensure that they are not paying for care that the local authority ought to be funding. It’s about acting quickly and taking proper advice.”

Whilst the Credit Crunch may mean that we all need to watch our spending, the message appears to be that we should make sure the approach we take is not too short term. In the long run, putting off making a Will and some financial planning might be a very costly mistake.

For more information on issues relating to Long Term Care please contact David Cooney on 01244 405544