It’s not uncommon for some of our mental capabilities to decline as we age. Many people find their memory gets worse; and processing speed, reasoning and executive functions can also slip as the years pass us by. Unsurprisingly, therefore, many people need a helping hand with finances as they get older.
For some, mental decline can be the onset of something more significant. According to the Alzheimer’s Society, 225,000 people will develop dementia this year – equivalent to one every three minutes. This can result in a very wide range of symptoms that make managing bills and expenses problematic: from a decline in day-to-day memory through to difficulties in concentrating, planning or organising.
29% of adults care for an elderly relative, and 41% say they might have to in the future according to research by Fidelity. This enormous group have been dubbed the ‘sandwich carers’ due to the fact that they support both children and the elderly at the same time. Fidelity’s research show that the typical spend or loss as a result of their care commitments towards elderly relatives is £5,544.50 on average, although 10% spend more than £10,000. In addition, a fifth in this group have had to reduce work hours to manage the responsibility, while one in 10 had to quit their job entirely. The stress of this drain on money and time puts a strain on financial, physical and mental health; with 40% say they are scraping by financially, and a quarter showing symptoms of ill health.
When you have parents who are heading for their sixties, making plans for the likelihood that they may need help in future can save a lot of time, stress and money down the line. Planning for your own future can also provide security and ensure your children do not bear a financial burden. So what steps can you take now to minimise problems in the future?
1 Put Lasting Powers of Attorney in place
Ensure you, your partner and any living parents have a Lasting Power of Attorney (LPA) in place nominating a trusted person to take care of their finances and make care decisions for them. This is something that should be dealt with when everyone is in good health. It ensures that you get to choose who will be your attorneys rather than leaving this decision to chance. Leave it too late and you’ll find yourself facing a mountain of court forms and thousands in fees and expenses.
LPAs can be made to deal with both finance and health matters. Both types are highly advisable – particularly as the courts are reluctant to grant the equivalent order in relation to health decisions for those who have already lost capacity.
Drafting an LPA is not as straightforward as it may appear at first glance. Common issues include the way attorneys and replacement attorneys are appointed, and the way instructions and preferences are worded. Conflicts with other documents such as Advance Medical Directives can also cause issues. In some cases, the LPA can be rendered useless because of unexpected changes that were not anticipated when the document was prepared. Using a solicitor can help avoid these pitfalls.
2 Review finances
Ensure a full review of each family’s assets has been carried out with a solicitor. This would include, for example, considering what would happen if any of you required full time care. It is easy to say that your children would simply sell your home – but legally, they will need the power to do this and without planning, the process can be complex.
Finances should also be reviewed from an inheritance tax (IHT) perspective. There are many allowances available that can minimise the amount of IHT payable, but every family’s circumstances are different. Estate planning advice helps ensure you and your loved ones are well provided for without putting more money than necessary in the taxman’s pocket.
One way estate planning can help is by ensuring you know, from an inheritance and capital gains tax perspective, which assets should be sold during a person’s lifetime (for example, to fund care), which should be written into trust (for example, life insurance policies) and which should be passed on via the Will. Exploring the various options and possibilities whilst everyone is in good health avoids rash and costly decisions if family members find themselves under pressure in future.
And keep your financial information to hand
Whether it is an unexpected short-term bout of ill health or a sudden unexpected turn for the worse, it helps if all details of accounts and bills are available for those assisting. This is something you can help put in place both for your own household and for your parents/in-laws, making any turn of events easier to manage.
3 Ensure Wills are updated
Failure to leave a Will can cause a lot of disharmony in the family as it means your property will pass according to the rules of intestacy. This may not be how you’d like to distribute your assets and may even leave unexpected and unintended consequences. You should therefore ensure all Wills for you, your parents and your in-laws are made with a solicitor and updated every three years. They should be stored safely (for example, in your solicitor’s storage facility) and a copy placed with each family’s correspondence.
4 Avoid unscrupulous schemes
Care is such a huge concern for so many, it may be tempting to try and place your assets out of reach so that they won’t be taken into account when a means test is performed. Unfortunately, many people are duped each year by unscrupulous, unregulated companies offering such schemes.
There is a fine line between what can legitimately done to preserve some of the family assets (for example, leaving a life interest for your partner in your property) and deliberately depriving yourself of assets to avoid care fees. You should always seek the advice of a solicitor at a regulated law firm before taking any such steps.
5 Plan to help
If care responsibilities seems to be a real possibility in the near future, now may be a good time to discuss flexible working with your employer. This may help avoid losing out on a portion of your salary. The law does allow you some time off to care for dependents – and for some, it also allows you to make a flexible working request (although your employer is not obliged to grant this). Sorting these matters out well in advance can allow you time to find a compromise that your employer is happy with and minimise lost earnings.
6 Get the help you need
If you’re already caring for someone, check to see if you are entitled to any allowances or benefits – click here to visit the Turn2us calculator. For example, if you’re under State Pension age and you care for someone for at least 20 hours a week, you may be entitled to Carer’s Credit.
See if there are any groups locally who can help share your responsibilities – or get in touch with the Alzheimer’s Society and find out about their Side by Side companionship scheme.