Prepare for when mum and dad need care

Homes for the elderly do not come cheap, so it's best to plan ahead, suggests Andy Couchman

OVER THE past 20 years life expectancy has increased by around two years but many of us can expect to spend those extra two years in chronic ill health. It is a problem that affects not just elderly people but whole families.

Last December the Government set up a Royal Commission to look into how society funds care in old age. Some 40,000 homes a year are sold to pay for long-term care fees and many who scrimped and saved to buy their own home will see their capital used up in paying for care fees at an average of over pounds 17,000 a year.

Even when the Commission makes its recommendations - expected early next year - it is unlikely that the Government will pick up the tab.

Since the welfare state was set up 50 years ago, care for the elderly has always been outside the remit of the NHS, except for the old-fashioned geriatric hospital wards that condemned many to a workhouse-style existence.

Since 1993 local authorities have applied strict means testing before giving financial help to those in care homes. In essence, if you have assets of more than pounds 16,000, including the value of your home unless a surviving dependent still lives there, you get no financial help. Between pounds 10,000 and pounds 16,000 you get some help and only if you have less than pounds 10,000 can you expect to get your fees paid by your local council.

The irony for many elderly people is that their children feel guilty about expecting their parents to fend for themselves but do not know how to help says Cheltenham independent financial adviser Ted Yeates, of Warwick Butchart Associates.

A generation ago, children tended to live closer to their parents and a daughter or son was usually expected to take on the role of full-time carer. Many still do but, increasingly, children have their own careers or get divorced, are more likely to move away as their career develops and will, on average, be better off than their parents.

Yeates, who is also a director of IFA Care, a group of advisers which lobbies to get this type of insurance properly regulated, says that most elderly people dread becoming a burden on their children and want to leave something to them or to their grandchildren. Insurance can offer a solution in the form of long-term care insurance but many elderly people cannot afford it - the average cost being around pounds 1,000 a year.

One solution, according to Peter Gatenby, director of insurer PPP Lifetime Care, and an adviser to the Royal Commission, is for the children to pay part or all of the premiums for their parents. Many elderly people do not like the idea of taking money direct from their children but this arrangement benefits both sides as the children enjoy a larger inheritance than they otherwise might.

A woman of 60 would pay pounds 73 a month to get a benefit of pounds 1,000 a month with Norwich Union's basic Personal Careplan so if her care fees cost pounds 1,500 a month, that would leave her to pay pounds 500 from her pension, state benefits and investment income.

Her two children could each pay her say pounds 25 a month, leaving her to pay the remaining pounds 23 or they could pay the whole premium, contributing pounds 36.50 a month each. "Quite a lot of people only think about insurance when they are in their 70s or even 80s," says Mr Gatenby. "Premiums are lower if you start younger. Many children are happy to help pay."

Mr Yeates also suggests setting up an enduring power of attorney that enables other people to act on your behalf. Prior to 1986 a power of attorney fell away if you became mentally unable to cope with your affairs - precisely the time you needed it.

Since then an enduring power of attorney can be set up that remains effective if Alzheimer's disease or a head injury means you can no longer handle your own affairs. But isn't that a licence for a child to take advantage of a frail and elderly parent?

Solicitor Jane White at the Stow-on-the-Wold office of Kendall & Davies says not. "An enduring power of attorney can be set up with restrictions," she says. "You might want to restrict its use so it can only come into effect if you become mentally incapable. For older people I usually do not recommend that because frailty becomes a more important issue. Even then you might want to restrict its use to dealing with your cash and investments but not your home."

An enduring power of attorney costs usually from around pounds 25 to pounds 100 depending on the solicitor and it makes sense to draw one up at the same time as your will, White says. "For many people an enduring power of attorney can be even more important than a will because it can affect what will happen to them while they are still alive," she says. "Some of the worst cases I have had to deal with are young people who have suffered severe head injuries. They may have received compensation but their families cannot spend the money on what they wish to without getting it approved by the Court of Protection."

Ted Yeates agrees. "An enduring power of attorney goes hand-in-hand with a will regardless of how old you are. It is also an opportunity to get adult children and their parents to discuss what they want to happen if mum or dad ever needs care. So often feelings of guilt get in the way but it's the children that feel guilty. Their parents often welcome getting these things discussed in the open, but don't know how to raise the subject."

Over half a million, mainly elderly, people now live in care homes with many more receiving care at home. Death might be the last great taboo but in many families, the need for care and who provides and pays for it is still an unmentionable subject.

IFA Care on 01299 405285; Kendall & Davies on 01451 830295; Norwich Union on 0645 330645; PPP Lifetime Care on 01789 415151; Warwick Butchart Associates on 01242 584144.

Andy Couchman is publishing editor of HealthCare Insurance Report