How to cope with long term care costs On the face of it, this looks as though those who are fortunate enough not to need care are subsidising the minority who do. According to Age UK, just 16pc of those aged 85 or over will need to go into a care home, although this figure is likely to rise exponentially over the next few decades. Insurance experts calculate that many of those who will need care won't see any significant reduction in costs, although it will provide some backstop for the minority who have both substantial assets and will spend years in care. At the same time, more of those lower down the income scale will be dragged into the IHT net. Chris Horlick of Partnership, a specialist annuity provider, said: "People should not be lulled into a false sense of security and assume that these proposals mean their maximum care bill will be £75,000, and the rest can be ring-fenced for their family." There are three major issues, he said. The most obvious is that this cap will only cover social care costs, so even when you have spent £75,000 on care fees, individuals will still be liable for future board and lodging costs, which can often account for a sizeable chunk of the total fees. Most nursing homes don't split out these costs, but anecdotal evidence suggests that on a £600-a-week nursing home bill, as much as £400 could be "hotel" costs. So even if this cap is reached, many families will still face steep care costs. Another problem is that the cost of care is based on the notional amount a local authority would pay if it was responsible to meet bills in full. As Age UK pointed out, there is often a significant gap between the rate paid by local authorities and the actual cost of care in many regions. Typically, a local council will pay just £480 a week, more than £100 a week less a year than the average care home fee. Many people will want to secure a higher level of care and comfort than that provided by the "average" nursing home, so could face even larger costs. The new £123,000 threshold may also not be as generous as it sounds: remember this will still include the value of your home (provided there is no mortgage on it). With the average house price now at £242,000, according to the ONS, this £100,000 increase may make little difference, as the average home owner is still likely to be a self-funder. Currently more than one in two care home residents pay some or all of their care costs. Even those with assets worth less than £123,000 will have to pay part of the cost; the local authority will only cover the bill in full when your assets are depleted to £17,000. These proposals aren't scheduled tocome into effect until after the next election. A change of government or a worsening of the financial situation could see these goalposts moved again. These new rules are unlikely to be retrospective, so the costs of care now, whether in your own home or in a residential setting, are unlikely to count towards this "cap." If a family member needs care now, or is likely to in the near future, there are several steps that families should take. The first is to request an assessment by the local authority. Before they make any financial assessment, councils have a duty to assess an individual's social and medical needs. The council then estimates what it would pay for this care, before a financial assessment is made to determine how much individuals have to contribute. But many people who know their assets are well above this means test don't have the medical assessment, so may not realise they qualify for other benefits such as attendance allowance or a contribution towards nursing care costs. This assessment should also identify if you qualify for continuing care, which means care costs are covered in full by the NHS rather than means-tested by the local authority. Very few people qualify for this, but you can ask for a reassessment if a relative's health deteriorates. If it looks like you will have to pay the bulk of care fees yourself, it is essential to get specialist financial advice. It is hoped that this new cap will encourage companies to launch new insurance products to help cover these costs, but there are already options. For those needing care today, it is worth looking at an immediate needs annuity. These are bought with a lump sum - often financed by the sale of a home - but guarantee to pay a fixed sum indefinitely. If this money is paid direct to the care home, then this is paid net of tax. Effectively, this gives families their own cap as they know the maximum spend. It also ensures people's money does not run out, leaving them to fall back on local authority funding, and potentially having to move to a cheaper nursing home. Janet Davies of Symponia - a network of care advisers - urged families to check whether they already had insurance. "Around 50,000 pre-funded policies were sold in the mid-Nineties," she said, "mainly to those in their late sixties. Many of these policyholders may soon need care. As well as advising on care issues, a specialist IFA can give information on other later-life issues: be it updating a will, setting up a power of attorney or inheritance tax planning. This will become more important for many families, with the threshold being frozen for at least another five years. There are a number of ways people can cut IHT bills: these include giving assets away, setting up a trust or making regular gifts from income. For more information, see telegraph.co.uk/tax.