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Planning for care home fees and long term care

24 November 2011

The impact on your main asset - your home

Your home is your main asset

For many people your home is your main asset and a key concern is how this may be treated if you need long term care.  The current rules governing the funding of long term care are that for those with capital assets over £23,250, the cost of funding the care is your responsibility.  The exception to this rule, is where nursing care is required and a contribution to the costs will be made by the NHS or, for severely ill people, the entire cost of NHS care may be provided.

Financial assessment

When carrying out a financial assessment to determine whether you are self funding or not, most assets are included except the surrender value of any life insurance policy, charity payments, social fund payments and certain interests in a trust.  Your home is included in the assessment unless it is occupied by your partner or a relative over the age of 60 or under 16.

Care in the home

Where care is provided in the home, your property is disregarded for the assessment towards funding care costs.  However, the cost of maintaining and running your home, as well as the care costs can add up to significant amounts, therefore it is generally those that have substantial income or other assets such as savings and investments, that are able to continue to live at home and receive higher levels of care. 

Equity release, is it a wise choice?

It is possible to raise funds against the value of the property to assist with paying for care costs by taking an equity release scheme.  These can help to ensure that you remain in your home if you do not quite have sufficient income to meet the costs.  However, equity release schemes are complex and carry a certain number of risks that need to be explained and understood. It is therefore imperative that advice is sought from a qualified financial adviser or solicitor before considering an equity release scheme.

Moving to a care home – what happens to your property?

If your care needs are at such a you need to move into a care home, unless it is disregarded for the financial assessment, or you have sufficient other assets, it will need to be sold and the proceeds used to pay care fees in one way or another.

There are circumstances where it is not possible to sell the property or it would not make sense to do so, for example in a falling housing market.

In some cases it is possible to apply to the local authority for a deferred payment scheme.  This is in effect an interest free loan from the local authority, which is secured upon the property.  If their criteria is met, the local authority will pay the shortfall between the individual’s income and the care fees payable.  The payments will accrue as an outstanding loan which must be repaid once the property is sold.  Interest is not payable until 56 days after the date of the applicant’s death and is at a rate set by each local authority.  

The local authority has a duty to consider offering this arrangement to individuals where it is applied for and it can be an effective method of retaining the property whilst in care, however it is still the individual’s responsibility to maintain the property.

Care fees annuity

For some people, the shortfall between income and the cost of care would ideally be met from the purchase of an care fees annuity, which provides an income for the rest of the individuals’ life.  These are usually purchased with a lump sum, often once a property has been sold.  However, there may be reasons why the individual wishes to keep the property or is unable to sell the property to release capital.  In these cases, it may be possible to secure the cost of a care fees annuity against the value of the house, although interest would normally be charged. 

There are several funding options available to cover the costs of care and care home fees, it is therefore important to seek honest and comprehensive advice to help you make the right choice for you and your family.

For further information contact Ruth Dolan, Chartered Financial Planner and Later Life Adviser, on 01227 763939.

 

 

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