Care is often treated as a separate conversation from pensions and wider estate planning. In practice they are closely linked, and with nursing care costing well over £80,000 a year, the stakes are high.
Build care into your wealth plan
A good plan should be stress-tested against a care scenario. Cashflow modelling shows what a few years of care would do to your income and your estate. It turns an unknown into a figure you can plan around.
How councils calculate what you pay
In England, council funding is means tested. With capital above £23,250 you will usually pay the full cost, a threshold frozen since 2010.
Savings and investments count, as does your home if you move into a residential care setting, unless a spouse or partner still lives there, but is ignored if you receive care at home.
An undrawn pension is not treated as capital, although the council may assume an income from it. Self-funders also often pay more than council rates for the same room.
Where wealth planning and care planning collide
Gifting is the clearest example. For Inheritance Tax, most gifts fall outside your estate after seven years, but the care rules have no fixed time limit.
If a council believes assets were given away to avoid fees, it can treat you as still owning them.
Nevertheless, gifts made early and while in good health are far easier to defend.
Pensions are another, as from April 2027, most unused pensions will count towards your estate for Inheritance Tax.
Using pension funds for care may now make more sense than spending other assets, however, income tax on withdrawals needs careful consideration.
Protecting what remains
A care fees annuity converts a lump sum into a guaranteed income paid to the care provider for life, ring-fencing the rest of your estate.
A deferred payment agreement can mean your home need not be sold in your lifetime. Where needs are primarily health related, NHS Continuing Healthcare may cover the full cost.
Baroness Casey’s commission is due to report by summer 2027, so any plan needs room to adapt.
Talk to us early
Lasting powers of attorney should be in place long before they are needed, and we can help you build care into your wider plan.
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