How can I pay for my uncle's care?

By THIS IS MONEY
Updated:

 

My 83-year old uncle has recently had to go into a care home. I have enduring power of attorney for his financial affairs, and it is my responsibility to sell his house to fund his care home fees.

Could you suggest the best way to invest the money to avoid tax implications and be able to pay the monthly care fees? J.B., Gillingham, Kent

Margaret Stone, the Daily Mail's Money Doctor, replied: The average cost of nursing home fees is now £500 a week or £26,000 a year. A local authority meets the cost of those fees only for someone whose assets are no more than £13,000. Where assets are £13,000 to £21,500 there is some help, but nothing at all for those whose assets exceed £21,500.

Assuming your uncle has the state pension and some other income, there is still going to be a substantial fee shortfall to be made good from the proceeds of his house sale. Your priority is to secure sufficient income to meet the immediate costs of the next few years. I have talked to specialist independent financial adviser NHFA (Nursing Home Fees Agency) which is now part of HSBC bank.

Its recommendation is an immediate care bond - basically an annuity. To keep pace with increases in nursing home fees, it should have an in-built annual increase of 5%. At his age, £55,000 could produce £15,000 a year.

There is a tax break here. If the income is paid directly to the home, then it will be tax free; if it is paid to your uncle, some of the income would be taxable.

In case of emergency, another £50,000 should be readily available in a bank or building society account.

The balance could go into an investment bond. There are now several specially designed for the over-80s market.

The key feature is that unless the bond is encashed (and that does not include death) within the five years, there are no-upfront charges. If the sums involved are substantial, then part of this bond could be written in trust to reduce the inheritance tax liability on your uncle's estate.

NHFA can be contacted on 0800 998833 or via any HSBC branch.

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