Funding your parents’ care: Are you prepared?

“Most people underestimate just how expensive care can be,” says Mark. “The average cost of a residential care home is £67,000 a year, depending on location, and if nursing is needed, costs can be higher. That’s before you consider the fact that fees usually rise each year, often above inflation.”

Funding depends on where you live in the UK, but in England, the local authority will only step in if your parents’ assets fall below £23,250.

“That means if your parents own their home and have savings, they’ll usually be classed as self-funding,” Mark explains.

There are exceptions, such as NHS Continuing Healthcare (CHC), which covers the full cost if someone has significant medical needs. But Mark warns this is difficult to qualify for: “Families shouldn’t rely on CHC unless there’s a clear, ongoing medical requirement.”

Another option is a Deferred Payment Agreement, where the local authority effectively loans the cost of care against the value of the home. “This can ease immediate pressure, but it does mean the cost will eventually need to be repaid, usually when the property is sold,” Mark adds.

And not all care is residential. “Sometimes families explore domiciliary care, support at home, which can range from hourly visits to live-in care. These options come with their own costs and complexities.”

Before you can make decisions, it’s essential to take stock.

“Start by auditing everything,” advises Mark. “Savings, pensions, investments, property ownership, and all sources of income from State Pension and annuities to potential benefits. Once you know what’s available, a financial planner can run cashflow modelling to show how long funds might last under different scenarios.”

This forward-looking view helps families understand whether existing resources are enough, or if other options need to be explored.

For many families, the biggest worry is the family home.

“If one parent needs care but the other is still living in the property, the good news is that the home is usually disregarded in the means test,” Mark reassures. “There’s also a 12-week disregard when someone first moves into care permanently, which gives families breathing space before any decisions about selling property are made.”

Ownership structure also matters. “If the property is owned as Joint Tenants, it automatically passes to the surviving spouse. If it’s owned as Tenants in Common, each spouse owns a share that can be willed separately, which may help protect part of the property for children. But families must be careful: if changes look like a deliberate attempt to avoid care costs, local authorities can challenge them.”

Sorting out the legal side is just as important as the finances.

“At the very least, families should have Lasting Powers of Attorney (LPAs) in place,” says Mark. “These allow someone trusted to step in if a parent loses capacity, either for health decisions or for financial matters. They’re invaluable, not just for incapacity, but also for parents who are frail and simply need help managing day-to-day admin.”

Updating wills is another must. “Out-of-date wills can cause huge problems later,” warns Mark. “And in some cases, families might benefit from trusts, such as a life interest trust. If you go down this route, make sure you work with a solicitor who is STEP-qualified (Society of Trust and Estate Practitioners), so you get specialist advice.”

Some families also consider a living will (also known as an advance decision or directive). “This lets you set out which medical treatments you’d want to refuse in future, should you lose the ability to decide for yourself,” Mark explains. “It provides instructions to healthcare professionals about your preferences for life-sustaining treatments, such as mechanical ventilation or artificial feeding.”

Care decisions rarely affect just the parent needing care. The entire family often feel the financial and emotional weight too.

“Adult children sometimes top up care fees if their parent’s funds don’t stretch far enough, especially if they want to ensure a higher standard of care,” says Mark. “But this can have a knock-on effect, delaying their own retirement or limiting how much they can help their own children with mortgages or childcare. It’s why open conversations across the family are so important.”

Family disagreements are another risk. “It’s not unusual for siblings to have different views on what’s fair. Having a financial planner involved brings objectivity and can take the pressure off children having to make tough calls alone.”

So, what are the practical ways to pay for care? Mark outlines the most common routes:

• Savings and investments
• Pensions (drawn down tax efficiently)
• Selling or renting property
• Deferred Payment Agreements with the council
• Immediate Care Plans (specialist annuities designed for care fees)

“An Immediate Care Plan (also known as an immediate needs annuity) can be a really powerful tool,” says Mark. “It’s a one-off lump sum paid to an insurer in exchange for a guaranteed income for life, usually paid directly to the care provider. The income is tax-free if it goes to a CQC-registered care home, and you can build in features like inflation protection and capital guarantees. It provides certainty, families know the fees will be covered, however long care is needed.”

Another often-overlooked support is Attendance Allowance. “It’s non-means-tested and provides up to £110.40 a week tax-free if care is needed both day and night. It doesn’t sound much compared to care fees, but every bit helps, and people often miss out simply because they don’t know it exists.”

To illustrate how planning often works in practice, Mark shares a typical client situation he frequently sees.

“Imagine Chris, who’s worried about his mother, Rita, aged 88. She had been living independently but, after a fall, it became clear she needed the support of a residential home. Rita had the State Pension, a small annuity, some savings, and she owned her house. Once her home was sold, she had around £170,000 available, but with annual care costs of nearly £47,000, the money could have run out in just a few years.”

Like many in this position, Chris was anxious. Would his mum have to move home later if the money ran out? Would he be expected to help fund the shortfall?

Mark explains:

“In these situations, we often recommend exploring an Immediate Care Plan. In Rita’s case, she might use £88,000 to buy the plan, which would pay £24,000 a year directly to her care home, rising by 5% annually to offset inflation. We’d also help her claim Attendance Allowance, adding a further £110.40 a week. Together, these measures give a guaranteed, tax-free income towards care fees for life.”

The outcome provides both security and reassurance.

“The plan could include capital protection, guaranteeing a minimum return either through the care payments or back to the estate. That means any surplus from the sale of the home could be invested for growth, leaving the possibility of an inheritance for children or grandchildren, something many families value deeply. Most importantly, it gives certainty that care fees will be met, without the constant worry about costs spiralling out of control.”

This scenario is for illustrative purposes only and does not represent a specific client or individual financial advice.

Mark believes the biggest mistake families make is waiting too long.

“The earlier you start these conversations, the more options you have. A financial planner can model scenarios, explain funding choices, and work alongside solicitors to put the right legal protections in place. Families gain clarity, certainty, and peace of mind, which makes all the difference at what can be a really stressful time.”