Home and Property – Residential Care Fees

Initial and/or Temporary Stay In Care Home

Introduction

The first 12 weeks of a permanent stay in a care home is free (and your assets will be disregarded).

If your stay in a care home is temporary it should also be free (and your assets will also be disregarded).

General Principles around Disregarding Assets

As a general rule, if you are admitted into care then your property, savings and other assets will be taken into account in a Local Authority means assessment.  There are two exceptions set out below.

1. 12 Week Property Disregard Conditions

The value of your property, savings and other assets will be ignored during the first 12 weeks staying permanently in a care home.

2. Temporary Stay in a Care Home

If you are staying in a care home temporarily, then the value of your home is ignored if there is a significant likelihood that you will at some stage be returning to your property.

Summary

Check that the first 12 weeks of any permanent stay in a care home is free and that your assets are disregarded.

If your stay in a care home is temporary check and make sure that your care is free and that your assets are disregarded.

Home and Property Exemptions 

Introduction

Your property will be exempt from a residential care fees assessment if it is occupied by your spouse/partner or by relatives under the age of 16 or over 60.

Occupancy by Spouse

If you enter into a residential care home and your spouse or partner continues to reside in the property, then it will be exempt from any residential care fees assessments for the duration of their occupancy.

Occupancy by Relatives under 16 or over 60

When a property has occupants who are relatives under 16 or over 60, then the value of the property will be disregarded as an asset.  Occupants can include spouses, partners, relatives over 60 or incapacitated, or dependent children under 16.

House Sharing

It may also be possible to enter into house sharing arrangements with an eligible person to prevent the property from being taken into account as capital, however house sharing arrangements would only be a practical solution in a minority of cases.

Local Authority Discretion

The Local Authority also has the discretion to disregard the value of a home if someone who lives in it doesn’t fall into one of the above category e.g.  a long-term carer or housekeeper, who has given up their own home to care for the resident.

Jointly Owned Property

If you jointly own a property with another person who is not your spouse, then the Local authority can take your share of ownership of that property into account. The value of your share will be dependent on a number of factors including when, and under what circumstances the property was purchased, whether the other joint owner is residing in the property and other factors. Usually a reduction of ten percent is allowed for allow for the costs of selling.

Summary

If you have occupants aged under 16 or over 60 that are rightful residents in your property then your property will be disregarded.

Ask the Local Authority to exercise its discretion – If you have unusual or exceptional circumstances then ask if the Local Authority if it will exercise its discretion to disregard the property.

Renting the Home – Residential Care Fees Protection

Introduction

You may find it more financially advantageous and beneficial to rent out your home and use the rental income to help pay for your care fees.

Check Your Finances

You need to be careful with this option as it is unlikely that the rental income from your home will cover all the residential care fees and you will need to make sure that you have sufficient income from other sources to cover any difference between the care fees and the rental income.

Property Still Treated As an Asset

If the home is rented out then the rental income being received will still be taken into account on a financial assessment.

Summary

Carry out some research to identify the likely rental income you might receive and to what extent that income will help cover the cost of care fees.  Unless you have an exceptionally large home it is unlikely your rental income will be enough to cover all of your care fees and you will need to make sure you have income or capital from another source to cover any shortfall.

Seek advice from a solicitor that specialises in these matters and also from a reputable estate agent and is able to properly assess and advise you on whether this might be a suitable option for you.

Deferred Payment Agreements – Residential Care Fees

Introduction

Deferred Payment Agreements are a useful way of arranging for residential care fees being paid.   You enter into an agreement with your Local Authority to provide you with an interest free loan in return for the Local Authority securing a charge against your property and for your care fees to be repaid when your property is eventually sold.

How Deferred Payment Agreements Work

Since 2001 Local Authorities have been able to offer deferred payment agreements.  The Local Authority (at their discretion) will allow the payment of some care fees to be deferred by effectively giving an interest free loan that is repaid when the property is sold.   This is done on condition that you grant the Local Authority a charge over your property.  This secures the loan and ensures that it will be repaid when your property is sold.  It is also possible to arrange a discount on the amount of council tax payable.

Advantages of Deferred Payment Agreements

There are a number of advantages that come from the deferred payment option.  When using this option, you are able to make a saving by paying the block rate for care.  You also retain ownership of your property.  This gives you the opportunity to rent out your home and generate an ongoing income to offset the cost of care.  Possibly the property may even appreciate over time, and hopefully there will still be some money that can be passed on to your family as an inheritance.

Disadvantages of Deferred Payment Agreements

It is unlikely that the rental income generated by renting out your property will provide sufficient income to cover the costs of your care so you will need to ensure that there are funds elsewhere that cover any shortfall between the costs of care and the rental income.  Some Local Authorities might not offer this option in any case.

Summary

Ask your Local Authority if they offer a Deferred Payment Agreement – If so on what terms.

Seek advice from a solicitor such as ourselves.

Equity Release Schemes – Residential Care Fees Protection

Introduction

An equity release scheme is a mortgage you take out against your home and release some of the equity/profit in your home, and you can use those loan proceeds to spend on things you want (e.g. improvements, holiday, new car etc.) and/or even to pay for residential care fees.

What Is Equity Release?

Equity release is a way of re-mortgaging a property and using the money released for other purposes without having to sell up and move.  A loan is made against the value of your property, usually of around 50%, and a mortgage charge is secured against the property.  You receive a lump sum of cash or a steady flow of income while you remain in your home rent free as long as you like.  With an equity release scheme, the interest on the loan is deferred and the loan and accumulated interest is repaid when the property is sold, usually upon you going into residential care, or after your death.

Long Term Care Fee Risks

Having money locked up in your property can work against you should you go into long-term care.  Equity release schemes can provide you with a lump sum or an income that can be used to pay for your residential care fees, either in advance or whilst you are in care, or even to spend on other areas such as holidays, new car, etc.

We Can Help

If you are looking for an extra source of income but want to stay in your home, call us and we can refer you to a specialist Independent Financial Adviser (“IFA”) in your area.

Summary

Seek advice from a solicitor such as ourselves and from an IFA that specialises in these matters and are able to properly help and advise you on whether this might be suitable for you.