There are many ways in which we can protect our loved ones as they get older. This blog will explore some of the ways you can make provision for parents and grandparents futures. Including powers of attorney and equity release.
1. Grant Power of Attorney
A Power of Attorney (POA) is a document signed when you are well but perhaps envisage a time when you will not be able to manage your own affairs. It gives legal authority to another person to deal with aspects of the granter’s business such as finances, property or personal welfare.
2. Get Authority
Without POA, family members contacting a person’s bank or building society will not be able to gain the power or information needed to help with a person’s affairs. Under The Adults with Incapacity (Scotland) Act 2000, a person will be unable to grant these powers if they become incapacitated, for example through physical injury or mental illness, so it is vital to grant POA before they are actually needed.
3. Avoid the Courts
If a doctor deems that a person has become mentally incapable of granting POA, relatives will have to resort to costly and time-consuming court proceedings to secure guardianship or an intervention order. Thousands of pounds worth of legal action can be avoided by seeking advice from a family law firm like Gibson Kerr to arrange official power of attorney while elderly relatives are able to do so.
4. Benefits Check
All families earning under £66,000 and pensioners should check whether they’re missing out on eligible benefits. Local authorities may grant £153 per week for personal care, and this figure can rise to £222 per week if nursing care is also needed. An independent advisor or a government agency such as Direct-Gov or the pension office can conduct a review of benefits to ensure you are getting the financial support you are entitled to.
5. Equity Release
If you own your home, equity release is one way to fund retirement years. The value of your home minus any outstanding mortgage, described as your ‘equity’, can be released with a lifetime mortgage – which releases a lump sum from the value of your property. The amount released plus any interest accrued is then repaid with the sale of your estate when you pass away or move into long-term care. Alternatively, a home reversion plan would see you surrender some or all of the ownership of your property in exchange for a lump sum and the right to remain living in the house, rent free until it is sold on death. Proper legal advice should be taken before you commit yourself to such an arrangement.
6. Means Testing
Local council’s contributions to care costs can work on a sliding scale depending on a person’s savings and financial income. Means testing starts at £13,750, and counts all of a person’s capital including the value of any property unless a surviving spouse, partner or relative over 60 lives there. Payments required from the individual will increase until a person with more than £22,500 will have to cover their own care fees. Levels for means testing can change with each financial year, but these figures are correct until April 2010.
7. Home Ownership
An estimated 70,000 people in the UK have had to sell their homes to finance their care in the last year alone. Couples can reduce the value of their home to be taken into account in the means testing exercise by making sure it is owned jointly, but with no survivorship clause. On the death of the first spouse one half of the value can go to children or a trust to ensure a surviving spouse is not considered the owner the whole property – and therefore obliged to use the funds to pay for care in later life.
8. Think Money
Reducing means tested finances can protect savings from being eaten up by care costs – but it is worth bearing in mind the level of government funding available.
Though the maximum benefits that can be claimed by an elderly person in Scotland is £222 per week, a recent Saga survey found the average cost of staying in a nursing home in Scotland was £596 per week. Reducing your finances may affect the level and standards of care available to you.
Remember too, any pension you receive either from the State or from a previous employer goes towards meeting the cost of care which means that that less of a contribution has to come from capital.
10. Inheritance Tax
Maximise tax reliefs and exemptions if your estate might be valued over the Inheritance Tax threshold of £325,000 when you die. If your estate is worth more than this, any gifts you make more than seven years before you die will be exempt from Inheritance Tax, or any gifts to UK charities, some national institutions or your spouse or civil partner if have a permanent home in the UK.
By 2033, a third of Scots will be of pensionable age – 1.34 million from a population of 5.54 million. The demographics make it all the more important to plan for the future now. The area is a minefield and you should take professional advice as everyone’s circumstances are different. A firm of solicitors like Gibson Kerr can help.