Steve Brown, a 47-year-old consultant and father of two, is navigating a challenging financial landscape to support his parents' care needs. His 75-year-old father, diagnosed with dementia in late 2022, currently lives independently. However, his 81-year-old mother requires round-the-clock care following a severe stroke in early 2023.
After an unsuccessful attempt to secure NHS Continuing Healthcare funding, Brown must now allocate £3,550 monthly for his mother's care home expenses. This situation highlights the difficulties many families face, as only about 18% of applicants receive NHS funding for long-term care.
To address these costs, Brown is considering utilizing his parents' combined assets of £725,900, spread across various accounts. His mother's estate, valued at £336,900, coupled with pension and rental income from a £280,000 property, generates £3,300 monthly. His father's £389,000 in savings and £1,550 monthly income provide additional resources. The family also owns a £600,000 house where his father resides.
Financial adviser Henry Anderson from Parallel Wealth Management offers several strategies:
- Explore Immediate Needs Annuities to cover lifelong care costs and potentially reduce inheritance tax liability.
- Retain sufficient cash for short-term and unexpected expenses in ISAs or NS&I Premium Bonds.
- Invest remaining funds in an onshore investment bond for medium to long-term growth.
- Consider selling the rental property, although this may incur capital gains tax.
- Investigate eligibility for Attendance Allowance, which could provide additional weekly support.
Anderson estimates the current portfolio could sustain care expenses for approximately 18 years before property sales become necessary. However, he cautions that care costs typically increase by 7% annually, potentially shortening this timeframe.
"Mr Brown's parents' portfolio is 72% in cash, which will not protect them from this level of inflation, so its longevity is likely to be much less than 18 years."
Frazer Wilson, senior wealth planner at Canaccord Wealth, provides an alternative perspective:
- Maintain the current diverse portfolio structure but review low-interest accounts.
- Defer property sales until absolutely necessary.
- Consider investing in bonds or low-risk equities to hedge against inflation.
- Assess risk tolerance before making portfolio changes.
Wilson emphasizes the importance of balancing the parents' established financial decisions with potential optimizations:
"Mr Brown might not be happy with his parents' finances, but they have been structured in line with their decisions and reflect their attitude to risk."
As the Brown family navigates this complex situation, they join the 40% of UK care home residents who fully self-fund their care. With the average stay in a care home lasting 2-3 years and the care home industry valued at £16 billion annually, many families face similar challenges in balancing care needs with financial management.