Allan Gardner: Long-term care requires your urgent attention

The potential cost is one of the biggest financial concerns facing the elderly.

If an individual has assets of more than 21,500, it is very likely there will only be limited assistance with care costs, which can average between 25,000 and 30,000 a year and, given the value of property, it is almost certain any homeowner will be in a difficult situation should long-term care funding be required.

So what options are available and what are the key considerations when planning to fund long-term care?

Specific financial products are available such as immediate needs schemes and pre-funded long-term care insurance.

Immediate needs schemes are designed to pay out an income for the purchaser's lifetime and are normally used when care is needed quickly and no other provisions can be made. It is basically an annuity purchased by investing a lump sum with a life assurance company. Often, the payments can be paid free of tax as long as they are paid to a recognised care provider. Each plan is individually underwritten and is based on the health of the applicant.

The major downside is, as with other pensions, the capital can be lost on death. It is also difficult to change once it has been set up.

Long-term care insurance is designed to pay an income until death should a care need arise. Payments for the insurance can be made monthly, yearly or in lump sums and the premium charged will depend on gender, age and medical history.

Unlike the annuity, which can be bought when care is needed, insurance cannot. In general terms, the younger you are and the better your health is, the cheaper the premiums will be.

But if you do not wish to consider either of these options, what should you do?

The golden rule is to think of the future but act now, as waiting until care is required could result in major problems down the line.

There are, of course, legal points to consider, particularly for those who own property. Using a tenants-in-common agreement rather than a joint tenancy could be beneficial, although in Scotland the situation is simpler as married couples usually own their home as if they were tenants-in-common already.

Confusingly, this is known as being "joint owners" but it allows you to will your share away as you wish. However, there are potential problems in opting to leave half your property to someone other than your spouse.

It is also crucial that an enduring power of attorney is obtained, as this allows others to make decisions on behalf of those who need care. Wills should be drafted or updated.

Leaving money in the bank may be safe, but if care fees can cost 30,000 a year and your average interest rate is 2 per cent then it won't be long before capital erosion occurs, so some form of alternative investment may be required.

An equity portfolio through shares or unit trusts might provide income through dividends and growth through increased capital value. However, recent stock market events have highlighted the risks.

One key point to consider is that many investment bonds are excluded from the calculation which determines how much your chargeable assets are actually worth and, therefore, how much you will pay.

However, it is important to stress you cannot just take out an investment bond when long-term care is a concern and you don't want to pay for it. There should be a valid reason for investing in one of these products, normally incorporated as part of a fuller portfolio including cash, individual savings account, term deposits and possibly shares.

If you do invest in a bond and know long-term care is a possibility then it will be considered deliberate deprivation by a local authority and the transaction will be cancelled.

The key asset that normally causes most concern is the home, and having to sell it to meet care costs is rarely ideal.

There are occasions when the property cannot be sold, such as when a spouse is still living in it, care is classed as "temporary" or ownership is under tenants-in-common and the spouse is deceased.

Renting is another option to provide income to top up private pensions to meet costs. As is equity release, whereby an income can be provided based on the value of the property.

A debt does accumulate, but that can be repaid any time and may be preferable to a sale.

Allan Gardner is financial services operations manager at law firm Aberdein Considine