This article appears as part of the Money HQ newsletter.

Many of us find it hard to think about ourselves or our parents needing help as we get older, and when we do start to think about it – perhaps in our 50s or 60s, the cost implications can make us wince.

The high cost of social care can quickly swallow up any inheritance that we planned to pass on to our children or grandchildren. It’s also important to remember that the proposed £86,000 care-fees cap, which the UK government is planning to introduce in England in October 2025, isn’t a silver bullet either. The proposal does increase the lower and upper thresholds for social care funding, but it only caps some care home costs, not all.

However with careful forward planning, you can mitigate the impact that care fees can have on your inheritance.

How long might I need to pay for care?

None of us can see into the future but you may need to cover social care costs for longer than you imagine. More and more of us can expect to live to 100, and the chances of getting to the end of a 100-year life without needing care of some form is unlikely.

The longer you live, the more the bill goes up and the less money there is for the family.

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Not only that but your children might have a long wait for their eventual inheritance. To counteract this, some older people are now choosing to skip a generation by passing their wealth directly to grandchildren, during their lifetime.

A multi-generational approach to financial advice keeps money flowing through families in the most tax-efficient way.

When should I make a long-term care plan?

Most people want to leave a meaningful legacy to their children and it’s a key part of later life planning. However, it’s important to get a reality check at an earlier age.

Discussing and planning for a range of scenarios earlier in life, when children are still living at home for example, makes good sense. It’s important for everyone’s peace of mind that everyone knows how social care would be funded, if and when it’s needed. It can come as an unwelcome surprise to discover that an expected inheritance has been swallowed up by care fees.

Talking to your family about long-term care

The first step is to start talking to your children about your plans and your wishes for later life care. This can be easier said than done, conversations about growing old and dying can be difficult for all sides. Emotions can run high too, especially between siblings, and a lot of feelings need to be considered. A financial adviser who’s one step removed can bring the parties together and find common ground and consensus.

Having these conversations early means everybody knows what to do, and is comfortable with it, should long-term care be needed.

Will I need a Power of Attorney if I need long-term care?

More often than we’d like, we hear from client families who suddenly find they need to pay bills or arrange social care on behalf of their parents – but they can’t do so because they don’t have an appropriate Power of Attorney (POA) in place.

A POA means that if you lose mental capacity and can no longer look after your financial affairs or your own health and welfare, someone you trust can act on your behalf. Depending on where you live in the UK, you might need a Lasting, Enduring or Continuing POA.

Making sure there’s a Power of attorney in place is one of the first things to get sorted when you’re starting your financial plan. Not having a POA can add needless distress and pointless delay at a difficult time.

The first step is to start talking to your children about your plans and your wishes for later life care (Image: Derek McArthur)

Can I avoid paying for care by giving away my assets?

The Government’s means-tested threshold sets your eligibility for State help with social care costs. If you have assets of more than £23,250 in England and Northern Ireland, £32,750 in Scotland or £50,000 in Wales, your local authority won’t normally step in to help. Which leads some people to think that, if they can give some assets away to other family members, they can duck below the means-tested threshold.

Although this sounds tempting, it comes with a large health warning labelled ‘Deprivation of Assets’.

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Deprivation of Assets is when someone gives assets to other family members in an attempt to reduce their level of wealth below the means-tested threshold so they can apply for local-authority funding.

If the authorities spot that you’ve done this, they’ll treat the assets as if you still hold them. You’ll be liable for your own care fees, and worse – you may have given away the very assets that you would have used to fund care. It’s a lose-lose situation.

Reducing your assets by gifting money

Gifting can reduce your estate legitimately. However, you must be clear what your intention is with the gift. If not, it could be considered as deliberate ‘Deprivation of Assets’. If you’re gifting money to help another family member afford a house deposit, this is more likely to be seen as a legitimate gift, depending on when the gift is made. Always keep a written record of gifts that you make, when they were made, to whom, and the intention behind the gift. Just in case it is ever queried by the local authority.

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And speak to a financial adviser before you make any gifts, to be sure that you aren’t making a costly mistake that you can’t reverse.

Just before you make a gift, there are two important considerations to remember. Firstly, whether you might need that capital back to pay for long-term care. And secondly, a local authority may not offer you the same care homes you would have chosen for yourself, if you were self-funding, which can limit your options.

Financial planning for the whole family

If, or when, you need to put long-term care plans into action, it’s a decision that affects everyone in the family. In practical terms, you may need your family members or your Powers of Attorney to step in if you’re not able to manage.

Having a multi-generational financial plan that considers the impact on inheritances and legacies, as well as the care bills, is reassuring for everyone.

Planning with the long-term future of your family in mind, as well as your own later-life care helps protect your future, and theirs.

Ben Stark is a chartered financial planner with over a decade of experience advising businesses and families. He is partnered with St. James's Place Wealth Management.