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Equity Release
Sometimes the situation can arise where the person needing care is married or is in a civil partnership and their spouse will continue to live in their home. Funding can then be somewhat of a dilemma.
Current legislation states that whilst all the time a spouse or civil partner still occupies the home, the Local Authorities cannot include the value of the property in the process of their means test or financial assessment. However, it is often the case that the person who still lives at home would want their husband, wife or partner to receive the very best care.
It is possible that this may mean arranging 24-hour care at home or being able to choose a residential home where they can be assured that their spouse or partner enjoys a positive and comfortable environment, and one that is near to them so they can visit and spend quality time with them.
Quite often, in either of the above choices, this may mean that the cost for providing the preferred care may be more than the Local Authority is prepared to pay. Indeed, if the assets owned by the person needing care are greater than the upper threshold, as confirmed by a financial assessment, then the Local Authority may not contribute at all.
It could also be likely that running the home on just one income puts additional financial pressure on the person staying at home, and any spare savings that may have been available, would be quickly eroded.
Equity Release may be able to help provide a solution.
Equity Release Schemes are specialist products that are designed to allow you, or the spouse still living at home, the opportunity to release capital from your property, either by way of a lump sum or income. There are no monthly repayments to make – the interest due on the loan is accumulated or “rolled-up” against the property over time. The loan and the interest due then becomes repayable on your death or when you decide to sell the property, or indeed the person still living at home needs to move into residential care themselves.
The equity released and the interest accrued over the lifetime of these types of scheme will reduce the equity value on your property and therefore any potential estate that your beneficiaries would receive upon your death. However, it could enable you to afford to pay for the care that you would like for your spouse or partner and/or provide an extra income for the person staying at home to meet household bills etc.
These schemes are available to people aged over 55 who own their own home. If you still have a mortgage outstanding on your property then it may be that this could be repaid as part of the equity release process, dependent on your eligibility and financial assessment.
Although they are becoming increasingly popular as a way to release equity from your home, especially as they do not involve the requirement to move or downsize your home to release capital, they are not suitable for everyone.
It is extremely important to seek specialist, qualified advice in this area, as the release of capital may have an affect on state benefits or Local Authority funding. It is also important to consider the other members of your family, especially those who may otherwise benefit from your estate, and where possible to involve them in your decision making. This helps everyone to understand the process and how the Equity Release Schemes work including their possible disadvantages and benefits.
Releasing Equity whilst a Care Resident
Most Equity Release Schemes can be helpful in releasing some of the money from your property to pay for domiciliary or residential care as set out above. However, to apply for such a scheme, normally at least one eligible person must still live in the property.
So what can you do to raise money if you are single or widowed and already in a care home, but cannot obtain a Deferred Payments Scheme with your Local Authority and cannot sell your property?
If you would like to raise money to buy a Care Fees Annuity but cannot or do not want to sell your property, and do not have any existing mortgage or Equity Release scheme on your property, we can provide details of a particular scheme which allows you to just release the amount of money required to buy an annuity without making any monthly repayments and without the need to live in the property.
The amount borrowed plus accumulated interest is then repaid on the eventual sale of the property or your death, whichever is the earliest, but in the meantime your care fees may be met by the annuity.
As with the original Equity Release Scheme noted above, releasing equity in this way will inevitably mean that the loan and interest accumulated will further reduce what your estate may inherit. However, this may provide the flexibility and freedom for your property to be rented out to provide further income (under the terms and in accordance with the Association of Residential Letting Agents).
Equity Release Schemes can also be used for many other financial planning reasons and not just to fund care fees.
If you would like to discuss Equity Release Schemes in more detail generally, please do not hesitate to contact us.
Mortgages on and Equity Released from your home will be secured against it
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