Just how much your local authority or health trust will contribute towards your ongoing care costs will depend upon how they assess your condition against their eligibility criteria and the assets you have available. It’s worth bearing in mind that local authorities will only assist with care costs if you meet eligibility criteria and the national financial eligibility criteria, whilst NHS continuing healthcare is also only available for the most complex cases. These aspects are covered in another section, but if you do not qualify for all of the support you want, you may need to consider using the capital tied up in your property to help meet your costs.
As this is a major decision, and because accessing money in this way can take time, it’s well worth considering all your options in advance – and possibly discussing them with other family members, especially if they are likely to be affected by any changes you make.
Making the right, long-term choice is much easier if you are not under pressure to make decisions in a hurry. So here are some of the options – complete with their potential ‘upsides’ and ‘downsides’.
Selling the property
If you are going into a care home, and no one else is living in your house, you could put your property up for sale and use the proceeds to fund your care. This affords the benefit of releasing a large sum of money which you can then use to meet your future needs. But expert advice may be needed to make sure that the proceeds will last long enough to cover the care fees for the rest of your life, otherwise you may be forced to move to another home of the local authority’s choosing.
Selling a house or apartment in today’s market can also be a lengthy process. We can help with this aspect and help you raise funds if needed whilst the property is being sold. Your local authority may also be prepared to cover your costs under the ‘deferred payment’ scheme until the sale is complete.
Having such a large amount of money in savings, rather than tied up in your home, can also affect any means tested benefits you might currently be receiving.
Deferred payments agreement
Many local authorities offer a ‘deferred payment agreement’, whereby they agree to fund your future care fees and then recover those costs after your death from the proceeds of your house sale. This is an option that can normally be negotiated if the person’s main asset is their home, and all the other assets are less than the upper capital limit (currently £23,250), or their income will not cover their fees.
This option does allow you to rent out the property and raise an ongoing income.
Letting your home
Letting the property and using all or part of the rental income to fund care can be advantageous if the family is keen to retain it, or if uncertain market conditions make it difficult to realise the full value of the house.
Renting out your home does bring its own set of challenges, and it can prove time consuming, so you may well wish to consider using a professional agent to manage this process for you. If so, it is advisable to use one registered with ARLA (the Association of Residential Letting Agents) to provide additional consumer protection. A good agent will also know the right rental level to set, advise on what modifications will be needed to your home, vet tenants, manage payments and organise ongoing repairs etc.
You should be prepared for ‘void’ periods when you calculate just how much income you can count on, as well as allow for ongoing costs such as redecorating, replacements and repairs.
Equity release products
There are two types of equity release products currently available: Home Reversion and Lifetime Mortgages. Both allow you to stay in your home, while retaining some or all of the ownership, and release money from the property (either as a lump sum or a series of smaller payments). Please note we do not advise on Home Reversion Plans but can put you in touch with someone who can.
The money released can then be used to pay for care, or anything else that you may need it for. These products may be more appropriate if you require care at home (domiciliary care) or where one partner needs residential care but the other continues to live at home.
While equity release may offer a handy solution for many people it is not for everyone, and expert, independent advice is essential before going down this route. It is also advisable to have a product which is ‘Equity Release Council approved’ which means a number of protections are in place, including a no negative equity guarantee.
Should you need domiciliary rather than residential care, you could consider downsizing in order to raise a lump sum for future care needs. Indeed, there are now many dedicated ‘extra care’ residential developments where help is readily available when needed, and provided in a secure and supportive setting.
Equally, if you are going into residential care, you could downsize your property to release funds, and retain that second property for future occupancy (by yourself or your family) or to rent out in order to raise income.
Do bear in mind the costs of moving, the on-going investment needed to maintain the property, possible periods of non-occupancy and the effort of moving between properties. Using a reliable agent to let your property will relieve you or your family of some of the burden.
Expert, independent advice is essential for a decision like this, particularly in regard to deciding what to do with your money, or if there is a risk that funds will run out while care costs still need to be met.
What is the best route for you?
This will depend upon your circumstances and personal preferences, but it cannot be stressed too strongly that you should explore all your options thoroughly with the assistance of an expert, independent adviser – and not be hurried into a decision. One important consideration for many will be minimising the impact of inheritance tax.
That makes planning ahead (whenever possible) the very best way forward. Source: Partnership 2015
Notes on Equity Release
Lifetime Mortgage – This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.
CHECK THAT THIS MORTGAGE WILL MEET YOUR NEEDS IF YOU WANT TO MOVE OR SELL YOUR HOME OR YOU WANT YOUR FAMILY TO INHERIT IT. IF YOU ARE IN ANY DOUBT, SEEK INDEPENDENT ADVICE.
Home Reversion Scheme – With a home reversion scheme, you sell all or part of your property at less than its market value in return for a tax-free lump sum, a regular income, or both, but stay on in your home as a tenant, paying little or no rent.
Our charges for Equity Release are usually £1,000.
Estate Planning is not regulated by the Financial Conduct Authority
Should you need any help or advice in this area, please do not hesitate to contact us on 01403 888490 or email us on email@example.com.