In this guide we explain:
- How people are living longer but may need more help in their later years
- How care costs aren’t the only financial concern
- Scams, loss of mental capacity and other problems
- Practical steps and help for families with older relatives
We hear much about the challenges of an ageing society in terms of the cost of pensions, the health service, and care.
Over-85s are the fastest growing segment of the UK population and there are more than half a million Britons in their 90s.
Of course, the fact that people are living longer is good news.
However, it’s also the case that as individuals live longer, they may spend more years in poor health.
Someone who is 65 years old can expect to live to their mid-80s on average – about another 20 years. But for around half of this – nearly 10 years – they could be in poor health, according to government research.
With age there also comes an increased risk of conditions like dementia. There are now more than 850,000 people with dementia in the UK and it has overtaken heart disease as the leading cause of death among adults.
The decline in an older person’s health and ability to cope with daily life may come at a time when the next generation also have their own children to look after.
At Brewin Dolphin, we recognise the strain this “sandwich generation” can be under, facing twin pressures of helping older relatives and bringing up their own children.
This guide aims to highlight some of the issues around the ageing of your loved ones and arrangements that can be put in place to make it easier to manage later-life difficulties.
Longer lives but longer declines
Increases in life expectancy mean that for a 50 year-old Briton there is now a 50% chance of reaching the age of 95.
Recent decades have seen life expectancy steadily increase, along with a narrowing in the difference in lifespans between men and women.
Men aged 65 are expected to live to age 83.7 on average. Women aged 65 are expected to live to 86.1 on average – about two and a half years more.
But while Britons are living longer, they may also spend more time in poor health.
According to the Office for National Statistics (ONS), a 65 year-old man will on average spend more than eight years of their remaining life – a shocking 44% - in poor health.
A 65 year-old woman is expected to spend nearly 10 years (47%) of their remaining life in poor health.
In the past when infectious diseases were common, death would often follow a relatively short period of illness. But nowadays, chronic (long-lasting) noncommunicable (ie. not infectious) diseases are the leading causes of death – and this is often preceded by long periods of moderate and severe ill-health.
The older the individual, the more likely they are to suffer from chronic conditions such as dementia, diabetes and arthritis.
As well as specific conditions and disorders, older people are likely to face a general physical and mental decline. This could include reduced mobility and confidence, and not being able to cope so well with daily life.
For families, these years of declining and poor health for older relatives can be a practical as well as an emotional strain.
It is not just about care costs
Care does not just mean moving into a care home. Most older people prefer to continue living in their own homes for as long as possible and there are a range of services and help that can be arranged to support them.
Private care agencies or individuals can help with running the home: for example, cleaners, dog walkers, gardeners and general home maintenance.
And if your relative is able to live independently but their current property isn’t right for them, options could include sheltered housing (where there is an on-site manager), downsizing, or so-called accessible homes which meet a number of easy access criteria.
Care costs can be huge – more than £1,000 a week. Brewin Dolphin can advise on the best way to fund these costs, and can provide a separate guide on this.
However, there are other financial concerns for older relatives that families should consider.
Scams and fraud
While anyone could fall victim to a financial or other scam, older people are particularly at risk of being targeted. They are often seen as more vulnerable.
Scams are primarily about tricking someone out of money, though they can also include ID fraud – stealing personal details – as a way of getting to their money, for example by spending on their cards or opening new accounts in their name.
Scammers tend to target people who live alone; are at home during the day; have money or valuables at home; are more likely to talk to them.
Sadly, this often means older people.
Loneliness might make older people more likely to talk to people or to trust them, while dementia could affect their decision-making.
Losing money to a scam can be very upsetting as well as expensive – the average victim of cybercrime loses £520, according to a government survey.
Tips for avoiding scams
The Financial Conduct Authority has details of how to avoid investment and pension scams https://www.fca.org.uk/scamsmart
Register elderly relatives with free “preference services” which aim to block unsolicited phone calls, emails, texts and letters. These include the Telephone Preference Service (register at 0345 070 0707 or at www.tpsonline.org.uk); the Mailing Preference Service (www.mpsonline.org.uk); and the Fundraising Preference Service (to stop unsolicited fundraising) at fundraisingpreference.org.uk or on 0300 3033 517.
Scams, fraud or cyber crime can also be reported to Action Fraud, the UK’s national reporting centre on 0300 123 2040 or at www.actionfraud.police.uk.
Loss of mental capacity
If an older relative loses mental capacity and is no longer capable of making decisions for themselves, don’t assume you can simply take over their finances and access their accounts on their behalf. Even if the individual is married or in a civil partnership, their spouse cannot automatically take over unless they have a legal document called a power of attorney already in place.
Crucially, once your relative is deemed to have lost their mental capacity it is not possible to create a power of attorney. And without this power, loved ones have to apply to an official body called the Court of Protection to become a deputy to allow them to make decisions on behalf of the older person. That can be a lengthy and costly process.
Without access to the older person’s money and accounts, the family may have to pay their care costs and may be unable to stop direct debits or other payments from those accounts. It is also important to note that while the loss of capacity could be the result of a slow-burn illness like dementia, a stroke or head injury could remove capacity without notice.
Couples and coping
Often in a couple one person will take the lead in financial matters, bills and similar paperwork. But what if that individual loses capacity or dies? Will their partner know how the finances are managed and where the relevant paperwork is?
If your parent or older relative does not have a will, then at death their estate is shared out according to what are termed the rules of intestacy – which may not reflect their wishes and can cause unnecessary upset to the bereaved.
Under these rules, only married or civil partners (as opposed to “common law” partners) and some other close relatives can automatically inherit. If there are surviving children, grandchildren or great grandchildren, the surviving spouse/civil partner receives the first £250,000 of the estate plus half the remainder, as well as all the personal belongings of the deceased. The children (or their descendants) receive the remainder.
In certain circumstances, this may mean the home that the deceased and their partner lived in has to be sold to pay inheritance tax or fund the distributions to the children.
Clearly, this could cause upheaval for the partner at a difficult time.
Likewise, even if your parent or elderly relative has a will, it may no longer reflect their current circumstances or wishes. For example, if grandchildren have come along, your relative may want to change who inherits what.
Have the conversation
Talking to a parent or older relative about ageing, death and their finances can be difficult. But it’s important you have the conversation before it’s too late.
Dealing with the mental incapacity or death of a loved one is hard enough without the additional burden that can come from financial concerns. Waiting until there is an emergency can create extra difficulties and costs.
Once you find the courage to discuss the issues, you may find the older person is grateful for your input. You may be able to help them with online research and paperwork that they may find difficult.
Having the conversation sooner should also give more time to consider options and achieve the best outcomes.
Compile a financial factsheet
Your relative may be the only person who knows the details of their bank accounts, savings, investments, and utility providers. Having a straightforward reference document which lists these details in one place can be invaluable in the event of them losing capacity or dying.
This “financial factsheet” will make it easier for you to manage their affairs for them or (if they have died) to start sorting out their estate.
Even compiling a basic list of providers with an indication of the product held can be very helpful, though details like passwords for accessing accounts should not be listed.
Brewin Dolphin can provide a formatted document which your relative can complete and store, or give to you to look after.
Setting up a lasting power of attorney
A lasting power of attorney (LPA) is a legal document in which an individual nominates one or more relatives or trusted friends to look after their affairs in case they lose mental capacity.
Importantly, the LPA needs to be set up while the individual still has mental capacity – but it does not mean they immediately give up control. The individual can choose whether the LPA can be used before, or only when, they lose mental capacity.
Having more than one person as an attorney can also provide some protection to ensure that this power is not abused.
LPAs replaced the previous Enduring Power of Attorney (EPA) system, though EPAs set up before October 2007 are still valid.
As well as an LPA covering financial and property decisions, a separate LPA can cover health and welfare issues such as decisions about medical treatment and where and how the individual wants be cared for.
The basic fee is £82 per LPA (£75 in Scotland; £115 in Northern Ireland). This is cheaper and easier than the alternative of having to apply to a body called the Court of Protection - which can take up to 6 months and where fees start at £400 – to act on your relative’s behalf.
However, LPAs are powerful legal documents and Brewin Dolphin recommends using a legal professional to set one up - particularly where a family does not get on. Legal fees could start from about £150.
Brewin Dolphin also has a separate step-by-step guide to setting up an LPA.
Check there is an up-to-date will
Does your older relative have an up-to-date will which reflects their current circumstances and wishes, and that passes on assets tax-efficiently? Brewin Dolphin can put you in touch with a solicitor who can help review your relative’s will. We can also advise on inheritance tax and ways to reduce a potential inheritance tax bill.
How we can help you
Brewin Dolphin is one of the UK’s largest wealth managers. We have long experience of advising and helping families across the generations.
We can put you in touch with solicitors who can help set up a lasting power of attorney or review a will. Our financial planners can also advise on ways to reduce inheritance tax bills.
We can help with compiling a financial factsheet for an older person to make it easier for you to manage their affairs if they lose mental capacity or to sort out their estate on death.
We can also put together a financial plan for paying care costs.
If you would like to discuss any of the issues raised in this guide please call 020 3201 3900 or contact your local Brewin Dolphin office.
The value of investments and any income from them can fall and you may get back less than you invested.
Please note that this document was prepared as a general guide only and does not constitute tax or legal advice. While we believe it to be correct at the time of writing, Brewin Dolphin is not a tax adviser and tax law is subject to frequent change. Tax treatment depends on your individual circumstances; therefore you should not rely on this information without seeking professional advice from a qualified tax adviser.
No investment is suitable in all cases and if you have any doubts as to an investment’s suitability then you should contact us.
The information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted.