Funding Care Home Fees
Every family at some point will face the issue of an elderly relative needing the security of a care home. The weekly costs vary according to area and the particular requirements of the person needing the care. If intensive nursing is called for then the costs increase markedly as you would expect.
The method of funding will vary depending on several points. They are principally: -
Does the person have sufficient funds to pay for the care entirely and become a 'Self Funder'? If this is the case there is unlikely to be any support from either the local authority or NHS. The basic consideration is whether they have more than £23,250 of assets. If so, they will be expected to pay some, or all of the care home fees.
Once the available money has reduced to the £23,250 figure then support is given. Bear in mind that receipt of pensions and any benefits such as attendance allowance will constantly top up the amount.
If the person owns any property they would be expected to arrange to release funds from that in order to support the fees. This can be done by sale of the property, and in some cases a local authority will place a charge on the property so that fees paid by the council can be recovered from the sale proceeds or upon the subsequent death of the person in care and eventual sale of the property.
It can be tempting to dispose of the property and distribute the funds to the family members to try and circumvent the charge, but this is deliberate deprivation of the councils due income and is a serious offence.
If the property is suitable it can be rented out and the monthly income used to pay the care home fees. In some cases a lump sum can be released to provide a reserve, with the interest payments being covered from the rental and the remainder being paid towards the fees. A specialist broker will advise on what are known as Buy to Let mortgages.
If a couple are involved with only one needing care then an Equity Release mortgage can be used to release a lump sum, or to draw down an annual sum to be used towards fees. You should discuss this type of mortgage with a qualified specialist in Equity Release.
All funding from either the local authority or the NHS is subject to a 'Care Assessment as this is a first step towards applying for any benefit. More information can be viewed at which.com.
Selling your home
You get full sale value immediately which you can use for funding care home fees or you may need to buy a care fee insurance policy.
Proceeds from the sale of your own home are not normally subject to tax, although this benefit will probably not be available to your estate.
You may have to wait some months to sell if the market is slow, you may not get the value you would in a more buoyant market. However, a short term mortgage can be arranged to release funds more quickly with the mortgage being redeemed from the proceeds of the eventual sale.
The benefit of future property inflation is not available to you or your estate.
Renting out your home
You and your Estate keep the property within the family and retain both the net rental income and the benefit of future property inflation
There may be tax and estate planning benefits from letting your property, if the net rent is applied to offset care fees. If the net rent is sufficient then, over a number of years, it will be possible to redeem the loan taken out on the security of the property to meet the ongoing cost of care fees, or the cost of a care fees insurance policy. Your family may then be able to inherit your property debt free once the loan taken out to pay for your care fees has been repaid. Moreover, your family may have the benefit of any property inflation being included into the value of the property.
Normally you can usually only raise part of the value of the home (usually a maximum of 75%) on a mortgage, if you need capital to fund care fees or to buy a care fees insurance policy, or other financial product.
You may need to do work to your home to bring it to a suitable condition to let. The costs of this need to be set against any capital you plan to raise from the release of any Equity in the property.
There are risks relating to choosing a good tenant and recovering the rent due, so we recommend using an established letting agent to manage the property.
The potential income from any buy to let property will depend on the size and condition of the residence, and in particular the area. Any home near a good school, or a station suitable for commuting, or with easy access to a main road network will command a higher rental than would otherwise be the case. Any established estate agent will give an expected rental estimate in advance of any decision being taken. Homes in sheltered accommodation areas are not usually suitable for renting due to the restrictions imposed on the development.