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As medicine advances and people live longer, more and more of us will require some form of care as we enter old age. Whether you are able to continue living at home or you need to move into a long-term residential facility, care does not come cheap.
The potential of having to pay for care can raise a number of issues for people – do I have to pay my own care fees? How will my partner be affected? Will I have to sell my house? If so, will my co-owners lose out on money they put towards the purchase of the property? Can I preserve some of the property as inheritance for my children? Are there any alternatives to selling my home?
Ultimately, selling your home may be the best option to pay for your care, however hard it may be to say goodbye. However, it is worth exploring all your options so you can make a fully informed decision about what to do.
Do I have to pay my own care fees?
If your local authority agrees that care is the best option for you, they will conduct a financial assessment (or means test) to work out whether you need help paying for your fees.
Most people are required to contribute something towards their care fees. The financial assessment will examine your income (including certain state benefits) and capital (including your savings). The assessment of your capital may or may not include the value of your home depending on your individual circumstances.
If you have capital over £23,250, you will have to pay all your care fees and if you have capital between £14,250 and £23,250 you will have to pay some of your fees. For this reason, the vast majority of people who own property have to pay all their fees increasing the likelihood that the family home will need to be sold to cover the costs.
Will the value of my home always be taken into account?
There are exemptions where the value of your home will not be taken into account for the purposes of the financial assessment such as:
- Certain people still live in the property, including:
- Your spouse, civil partner, partner, or former partner (where you are not estranged)
- A close relative over 60 years old
- A close relative who is “incapacitated”
- A child of yours under 18 years old
- Your estranged or divorced partner if they are a lone parent
- You are not moving into long-term residential care – if you are receiving care at home or are only moving into care temporarily, your home will not be taken into account when working out how much you should contribute
- You moved into care less than 12 weeks ago – for the first 12 weeks you live in a long-term residential care home, the local authority cannot take your home into account for your financial assessment. This gives you breathing space to think about whether you want to sell your home or whether there are alternative options to think about
The local authority also has discretion to disregard the property in certain circumstances, for example, if there is a risk of someone becoming homeless.
Will my co owners’ shares in the property be taken into account?
No. Only your share in the property will be taken into account during your financial assessment. Therefore, anyone who co owns the property with you or otherwise has a beneficial interest (such as someone who has contributed towards the purchase price) will receive their share if the property needs to be sold to pay for your care.
Alternatives to selling your home
Although it is understandable that you may want to minimise the amount you spend on care, you cannot give your home away or put it in trust for the sole purpose of avoiding care fees. This is called deprivation of assets and your local authority could still count the house during your financial assessment.
You can give your home away or put it into trust for other reasons. However, there is always a risk the local authority will challenge this and draw you or your family into a dispute. There are also many other acceptable ways to avoid immediately selling your home by finding alternative ways to pay for care.
Deferred payment agreements
Deferred payment agreements (DPAs) allow you to keep your home by delaying your care costs until a later date. This tends to be until you pass away or as a “bridging loan” to allow time to sell the property (for example, if the property market is bad at the point you need to pay for care).
The local authority will place a legal charge over your property in the meantime to protect their interest.
Equity release is an increasingly popular option with people who need to access the value of their home but don’t want to sell up. Equity release could be the right option for you if you don’t need to move into long-term residential care.
There are two types of equity release:
- Lifetime mortgage – you take out a mortgage which is secured over your home. You do not have to make any payments and the interest is rolled up into the loan. You only need to repay the loan after you die or move into long-term residential care. You can ringfence some of the value of your home to leave to your loved ones as inheritance.
- Home reversion – you sell part or all of your home, subject to you being allowed to live there rent-free until you die or move into long-term residential care. As with lifetime mortgages, it is possible to ringfence part of the property to leave to your loved ones.
Rent out your home
You may be able to use rental income to pay your care fees. You should think about this option very carefully as there are considerable responsibilities associated with renting a property, including maintenance requirements. Rental income is also taxable. However, if you would prefer not to sell your home or you do not want to sell until later, this could be a suitable option for you.
Ringfencing inheritance in your Will - Property Protection Trust Wills
Ultimately, it may be necessary to use some of the value of your home to pay for you or your partner’s care. However, it may also be possible to protect some of the value for your loved ones in the future.
This can be done by setting up a Property Protection Trust (or Protective Property Trust) under your Will. These trusts work as follows:
- If you move into care, your home will not be taken into account for your financial assessment while your partner still lives there
- After you die, your share of the property will pass into trust to be held for the benefit of your partner. They will be allowed to continue living in the property but your share cannot be taken into account for care fees by the local authority
- If your partner later requires long-term residential care, the property can be sold and their share used to pay the fees. Your original share will continue to be held in trust
- After your partner dies, your children or other chosen Beneficiaries will inherit the share held in trust
Get advice from our expert Elderly Client Care team
At Harold Benjamin, we have a dedicated Elderly Client Care team specialised in the unique legal matters and challenges facing older and vulnerable people.
We provide a comprehensive service covering Will drafting, trusts, Inheritance Tax planning, and general estate planning. We will listen closely to your concerns then offer detailed advice on your options, including whether it will be necessary to sell your home to pay for care fees.
Get in touch with our expert private client solicitors today by giving us a call at one of our local branches in Harrow or the West End. Alternatively, please fill in our online enquiry form and a member of our team will get back to you shortly.