Livia case study
This case study looks at how a Lifetime Care Plan can help Livia fund her care.
Livia is 87, widowed and lives in London. She has become concerned about her ability to continue living in her home without assistance.
She now struggles to manage the stairs in her house and has a struggle getting up in the morning. She has difficulty getting out and about to see her friends as much as she used to, and she misses the company of others.
She has three children who take it in turns to provide at home care, but they find it difficult to juggle with their young families and work.
Livia is not eligible for any assistance from the state and will have to pay for her own care.
|Livia's assets||Expected outgoings|
Annual income from personal and state pension: £16,000 after tax
Livia has found a care home that she likes near to her family that costs £52,000 a year.
Livia would like to have a weekly allowance of around £25 to £30 to pay for treats and personal expenses.
Please note this example is not real, it is for illustration purposes only.
Livia will keep £27.75 a week from her annual pension income and use £14,557 to pay the first part of the care home costs. Livia will then sell her house and use £208,800 to buy a Lifetime Care Plan to receive £37,443 a year to be paid to the care home for the rest of her life, increasing each year by 5%.
Under current tax rules, the cost of her Lifetime Care Plan is deductible from Livia’s estate’s future value. It will remove the cost of the Lifetime Care Plan from within the estate. This can help to manage inheritance tax liability.
For someone of her age, the average life expectancy, according to the Office for National Statistics longevity calculator, is 93 years old, six years from now. It will take her just over five years to have recouped the initial amount she paid for her Lifetime Care Plan.
Because payments are being made directly to the care home, there is no tax payable. Under current tax legislation, no income tax should be due on payments we make to a UK registered care provider.
Because Livia has selected to have the Lifetime Care payments increase by 5% a year, this may go some way to helping pay for any future increases in the care home costs.
Livia and her adviser choose to place the remaining assets in suitable investments as she is reassured there is an amount of money already ring fenced towards her care costs.
As part of her Lifetime Care Plan, Livia automatically has Guaranteed Premium Protection for the first six months of the plan. So a proportion of the original payment would be returned to her estate in the event of premature death in the first six months, less any payments we've already made:
Premature death in month
% of premium returned
(less care costs to date)
(less care costs to date)
|2 to 3||50%||£104,400|
|4 to 6||25%||£52,200|
Actual payments from the Guaranteed Premium Protection will depend on individual circumstances. Any amount paid to a client's estate may be subject to inheritance tax.
When meeting a financial adviser they would tell Livia and her family about the risks involved with the product:
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