Will paying for long-term care affect my inheritance planning?

At a glance

  • The cost of long-term care rose by 19% between 2021/22 and 2022/2323.1
  • Many more people are living to 100, and we may need social care for years – making a big dent in our savings and how much money our children may inherit.
  • Financial advice can help you to plan ahead to cover your social care costs and leave money to younger generations.

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. In 2023, the average cost of residential care in the UK rose to £46,000 per year, rising to over £50,000 in certain parts of the country, or for specialist nursing or dementia care.2

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 costs, not all. Read more here about what the government cap on care fees mean for you.

But 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, in terms of planning ahead – it could be longer than you think. 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.

Not only that but the longer you live, the longer your children will wait before coming into an inheritance. To counteract this, some older people are now choosing to skip a generation by passing their wealth directly to grandchildren.

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. But it’s important to get a reality check at an earlier age.

Discussing and planning for a range of scenarios at an earlier stage in life, when children are still living at home for example, makes good sense.

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, find common ground and consensus – and help take the heat out of those discussions.

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

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.

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.’

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 yourself. 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 and the intention of the gift, just in case it is ever queried by the local authority. And speak to a financial adviser before you make any gifts, just to be sure that you aren’t making a costly mistake that you can’t reverse.

There are two considerations to keep front of mind when deciding to gift, too. Firstly, whether you might need that capital back to pay for long-term care. And secondly, if you do qualify for social care assistance from your local authority, you may limit the care homes options available to you, and they may not be ones you would have chosen.

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.

Starting to plan with the long-term future of your family in mind, as well as your own later-life care will help protect your future, and theirs.

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

To find out more about family-based planning, speak to us.

We can also put you in touch with our partners at Care Sourcer, experts in arranging the right long-term care for you or a loved one.

Advice given in relation to a Power of Attorney and from Care Sourcer will involve the referral to a service that is separate and distinct to those offered by St. James’s Place. Powers of Attorney are not regulated by the Financial Conduct Authority.

Members of the St. James’s Place Partnership in the UK represent St. James’s Place plc, which is authorised and regulated by the Financial Conduct Authority.

St. James’s Place plc Registered Office: St. James’s Place House, 1 Tetbury Road, Cirencester, Gloucestershire, GL7 1FP.

Registered in England Number 4113955.


1 Which? Report Care home fees soar amidst cost of living crisis, accessed 22 February 2024
2 UK Care Guide, accessed 2 Feb 2024

SJP Approved 26/02/2024


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Sovereign Wealth Limited is an Appointed Representative of and represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely on the group’s wealth management products and services, more details of which are set out on the group’s website www.sjp.co.uk/products. Sovereign Wealth Limited is a Limited company registered in England and Wales, Number 07115386. The ‘St. James’s Place Partnership’ and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.