3 important ways you can help your elderly relatives with their money as costs rise

As your loved ones age, their need for health and social care often becomes increasingly pressing. Sadly, the reality is that elderly care can also come with substantial costs.

Indeed, This is Money states that the annual average fee for care homes increased by 11% in 2023 to nearly £46,000. If you include nursing costs, this figure typically rises by another 20%.

On top of this, the overall cost of living has been on the rise in recent years. For some elderly people, this may have eroded savings, putting unhelpful pressure on their finances – FTAdviser reports that inflation has increased the “minimum” cost of retirement by 18%.

The rising costs of residential care, coupled with the effects of inflation, could prompt you to step in and offer your elderly relatives the financial support they need.

Thankfully, there are several ways you can help them cope financially during a time of rising costs. Continue reading to discover three ways to help your older loved ones navigate their finances.

 

1. Reduce your relatives’ living costs by offering them accommodation

If your elderly relatives are thinking of downsizing to cut costs, another way to financially support them could be to accommodate them in your home instead. 

However, before considering this option, it’s worth reflecting that you may need to alter your property to make it more accessible for someone with additional needs.

Similarly, you may find that you don’t have enough time to properly care for your relative if they have specific needs. While you could pay a carer, this extra cost would affect your monthly budget.

Despite these considerations, housing your elderly loved one could result in significant savings on their end, especially considering the high price your relative could pay to live in a care home. Also, they may be able to contribute towards the household expenses, lightening the financial load of having an extra person in the house.

As well as potentially helping your elderly relatives save some money, having them move in with you could be a helpful way to ensure they’re receiving the highest level of care and comfort possible.

 

2. Encourage your relative to register a Lasting Power of Attorney, so their finances can be managed by a trusted loved one

If your elderly relative starts to lose mental capacity due to dementia or another illness or injury, they may be unable to make informed financial decisions.

Unfortunately, dementia figures are rising in the UK. According to the Dementia Statistics Hub, 944,000 people were thought to be living with the disease in 2021, and this figure is expected to rise to 1.6 million by 2050.

Since they can only register a Lasting Power of Attorney (LPA) while they’re of sound mind, it may be worth encouraging your elderly loved ones to do so before it’s too late.

An LPA allows the individual to nominate an “attorney” who can make financial decisions on their behalf if they become mentally incapacitated. The attorney can also help with the overall management of the person’s finances, even if they are of sound mind.

There are two main types of LPA you can register:

• Health and welfare – The attorney can make decisions regarding your relative’s health.
• Property and financial affairs – The attorney can access your relative’s bank accounts and pensions, pay their bills, and make protection claims in their name.

It may be prudent for your elderly relative to nominate an attorney sooner rather than later. If they lose mental capacity without one, the Court of Protection typically puts a “deputy” in place, and you’ll need to apply for the role of attorney.

Even if your elderly relative has full capacity, an LPA could bring them peace of mind, as it would allow them to defer the day-to-day handling of their finances to a trusted loved one.

As such, nominating an attorney could be a beneficial way to ensure that your elderly relative’s best intentions are considered, and to decrease their overall financial stress in later life.

 

3. Help to fund care home costs

If you have an elderly relative who requires continued care, this can come at a significant cost.

Accessing care funding from the state can be complicated, but before you step in and offer financial support using your own wealth, you could benefit from knowing what the government may provide. Here are two important factors to understand about paying for care. 

1. Your elderly relative can complete a “means test”

Once your elderly loved one completes a care needs assessment, which establishes the kind of continued care they will require, they will be asked to undergo a financial evaluation, often called a “means test”.

For the means test, the local council will examine the person’s income, savings, and assets to determine whether they will need to pay for their own care. As of 2023/24, if your loved one has more than £23,250 in assets, known as the “upper capital limit” (UCL), they will be required to pay for their own later-life care.

If they have less than £14,250 to their name – known as the “lower capital limit” (LCL) – they will only pay what they can afford from their income.

Finally, if their wealth sits between the UCL and LCL, your loved one will pay what they can afford from their income, plus a means-tested portion from their assets.

It’s important to note that your relatives are entitled to a “Personal Expenses Allowance”, ensuring they have at least £28.25 a week left over after contributing to care fees as of the 2023/24 tax year.

While you are not legally obliged to pay for your elderly relative’s care unless you jointly own the assets considered in the means test, you can contribute. If your loved one has to fund their own care, offering them financial gifts to help cover these costs could be constructive. 

This may help ensure they don’t exhaust their funds during their lifetime, and that their health concerns are not compounded with further financial stress.

It may also be worth checking whether your relative is entitled to NHS continuing healthcare (CHC), a non-means tested package that covers the cost of their care and accommodation following a disability or illness. However, it is typically only available to those with complex care needs.

2. The capital limits for means-tested support are changing

It’s important to note that the government is changing the criteria for means-tested support from October 2025. The changes will be as follows:

• The UCL will rise from £23,250 to £100,000
• The LCL will increase from £14,250 to £20,000.

So, before October 2025, if your relative has wealth surpassing £23,250, they may not be entitled to assistance with care costs from their local council. This rule will apply to those with more than £100,000 in total assets from October 2025 onwards.

Additionally, a cap will be imposed on personal care costs in October 2025, limiting the total amount of money someone must spend to meet their eligible care and support needs to £86,000. 

If your elderly relative is going into care soon, assessing their finances with a financial adviser could be hugely beneficial – especially if you wish to help them using your own money.

 

Get in touch

We can help you manage your family’s finances to ensure your elderly loved ones receive the support they deserve. Please email info@chancellorfinancial.co.uk, or call 01204 526 846 to speak to an adviser.

If you’re already a client here at Chancellor, contact your personal financial adviser to discuss any of the content you’ve read in this article.

 

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

All contents are based on our understanding of HMRC legislation, which is subject to change.