How To Avoid Selling Your House To Pay For Care
The average cost of residential care across the UK is on the increase. In fact, most people pay at least £35,000 for care each year, and that can go up to as much as £50,000 if nursing care must factor into the equation. No one can actually force you to sell your home to pay for care. Unfortunately, however, most people will have to contribute to the overall costs of care later in their life. Some will even have to pay the full amount for care as their living situation becomes significantly more complex. What can you do to learn how to avoid selling your house to pay for care? This guide can help you understand exactly how to make that happen.
Understanding the Problem
No one wants to think about growing older and requiring care assistance. Moving from your home into care is a traumatic experience, but it’s only made more traumatic by the fact that you may not be able to afford care. If a care home becomes the best option, local councils work to pay as much as possible toward your care, and that can mean selling your house to pay for care because it becomes your most valuable asset in many cases. Understand, though, that it doesn’t have to work that way. In fact, if you want to stay in your home or your spouse wants to stay in your home, selling your house to pay for care home fees isn’t a requirement. Any qualifying dependents who live in the home have the right to stay as long as they’d like, thus the home can’t be sold to pay for care. Qualifying dependents include your spouse, your partner, close family members over the age of 60, family members under the age of 16, or your ex-spouse if they’re a single parent. The council cannot force anyone to become homeless because you need care.
The problem of money, though, remains pertinent. Before the council will look to sell your home, they conduct a standard means test to better understand the situation. They look at all of your assets (which necessarily includes the value of your home). If your assets exceed £23,250, significant contributions from you must be made for your care. Anything less than that and the council offers significant assistance. You may, however, still be required to contribute something, which is why so many people turn to their homes, their largest assets.
The cost of a care home is quite large. It can be as much as £60,000 a year, depending on your individual situation and exactly how much care you need. These costs lead many to wonder whether it’s possible to receive in-home care to avoid the excessive costs. That’s absolutely a possibility, but it will depend on your situation. For example, 24-hour care in your own home means costs that surpass those you might pay in a care home. If, however, you simply need a small amount of care, it may be possible to save your home and simply pay for fees out of pocket.
The Problem with Gifting Your Assets
Many believe they can simply gift their assets away before they enter a care home. That’s just not the case, though. If you deed your house to your children or suddenly empty your bank accounts, the means test will reveal the fact that you’ve made that move. As a result, you will be considered to have deliberately deprived the government of your assets, and the council moves forward just as if you still own your assets.
A Care Fee Will Is a Better Choice
Avoiding selling your home to pay for care isn’t easy, but it is possible. Creating a Care Fee will is a better option. It’s legally recognised, and it’s a simple way to secure your home and your other assets. If you own a property jointly (whether you have a mortgage or not), you use your will to gift your share of the property to your kids. You need to initially ensure that your property is owned as “tenants,” which actually gives you a share of the property to leave to someone. This means that it would (normally) automatically pass to the survivor of the relationship. If it’s not registered that way, you need to have a severance done. The severance allows each owner to leave their share. When you need a care home, then, the council can only see half of the home as yours. The other half is already protected. This works really well as long as you’re both still alive. When your partner dies, you have the right to remain in the property for your lifetime as well as the right to sell the property and even buy another. You’re not vulnerable to your partner’s beneficiaries wanting a share of that property. Instead, you’re considered a trustee, so you have some control. It also isn’t considered a gift, so none of the rules about deliberate deprivations apply. Should you need long-term care, only your half share can be taken into consideration by the council, protecting that other half even if your partner has died.
Other Possible Alternatives
There are other alternatives to selling your home so you can pay for care as well. It is possible to complete a deferred payment agreement with your local council. This is just an arrangement that allows you to use the value of your home to pay for care. The local council agrees to pay for the care home bills initially, and you delay repayment to them until your home has been sold or until your death. The local council then puts a legal charge on your property that is removed once the debt itself is repaid. In most cases, you can’t use more than about 75% of the value of your home to pay for those fees, as it leaves enough money for the executor of your will to cover the cost of selling the property and ensures the council gets their money back after you’ve passed. This process can be a fairly long one, though, as it can take up to three months to set up.
An equity release loan is also an option. With this kind of loan, you get immediate access to the equity you’ve built up over time. You must be at least 55 or older to use this type of loan, and your property must be worth at least £70,000. You can choose to release one large payment or just access smaller sums as you need them. There are two main types available: a lifetime mortgage and a home reversion. With a lifetime mortgage, you get a loan against the property, but you still own it. Interest accrues on the amount you borrow, but you don’t have to make regular payments on that. The loan is typically repaid when you pass away or move permanently into care. With this type of loan, you’ll never owe more than the value of your home, and when the property is sold and the debt is sold, there may still be leftover funds for your heirs. The disadvantages of this kind of loan, though, are that the property will be sold, so if you were hoping to hang on to it for your heirs, that’s not really a possibility. A home reversion is the second type of loan, and this is available to homeowners who are over the age of 65. In this type of loan, you can still get a cash lump sum and you can remain in the property rent-free until your death. It allows you to release more money than a lifetime mortgage, but this isn’t a loan. You sell all (or at least part) of your property to the home reversion company.
Your final option is to rent your home out. While this can be a profitable option, there’s quite a bit to learn, so you may need some help to learn exactly what must be done when you become a landlord and what maintenance must go on once find tenants. Most landlords earn less than £20,000 a year, so if that won’t be enough to cover your care expenses, it’s worth it to consider this option quite carefully as it may not be a good idea.
Start Planning Now
One of the best moves you can make is to begin planning how to pay for long-term care as soon as possible. An Immediate Care Plan, sometimes called an Immediate Needs Annuity, is a good choice. These are long-term care insurance products. You pay a lump sum which is calculated on the benefits you would like to receive from the plan, then when you need care, it pays your care provider a set amount of income back that will continue over the span of your life, no matter how long that is.
There are other care plans available, too. A deferred care plan also makes regular payments to a registered provider, and you’ll choose exactly how much you want to receive from that company when you set up the plan. This plan, however, does not give you immediate access to care. You make a lump sum payment, and then agree to defer care for up to five years. The longer care is deferred, the lower the lump sum payment requirement.
A care payment option plan works in a similar manner, but you don’t have to make a lump sump payment. Instead, you use the equity in your home to invest in care. The payment for care home fees can start as soon as you need them, and the overall amount you will receive is determined based on how much you can borrow on your house. This kind of plan isn’t right for everyone, but it’s ideal if you’re the sole owner of a property and you don’t have access to a lump sum so you can purchase a different kind of plan.
Making the Hard Decisions
If you’re trying to decide how to pay for care immediately, your best bet may be to discuss your situation with an independent financial advisor. You don’t have to sell your home to make sure you get the care you need, but there are many difficult decisions to make, and consulting with an advisor is the best way to look carefully at all of your options.