A staggering one in four people may need social care at some point. With residential care home fees in the UK soaring by 11% in 2023, reaching over £46,000 annually (excluding nursing costs), the financial burden can be substantial. Most people find themselves self-funding these costs, which could significantly diminish savings and reduce the size of estates.
The Dilemma of Selling Your Home
For many, the immediate thought is to sell their property, often the most valuable asset, to cover these costs. However, this isn’t the only route.
Understanding Your Property’s Role in Care Funding
Your eligibility for local authority-funded care depends on the value of your assets, including your home. The thresholds vary across the UK, with £23,250 in England and Northern Ireland, £32,750 in Scotland, and £50,000 in Wales. If your assets exceed these figures, you’re expected to fund your care.
Exceptions to Including Your Home’s Value
Your home’s value won’t count towards this calculation if:
- You continue living there while receiving care.
- Your spouse or civil partner remains in the home.
- An ‘eligible relative’ such as a family member over 60, dependent children under 16, or a disabled dependent relative, lives there.
Alternatives to Selling: Deferred Payment Agreements
A deferred-payment agreement is a viable option if you move into residential care and no eligible relative stays in your home. This arrangement involves the local council covering your care-home fees, with the loan repaid when the property is sold. The repayment can be deferred until you decide to sell or upon your passing.
The Importance of Family Discussions
Entering into a deferred-payment agreement can affect the size of your inheritance. Transparent discussions with your family are crucial, especially if they’re relying on an inheritance for significant expenses like education or mortgage payments.
Renting Out Your Property
Renting your property is another strategy to cover care-home fees. By appointing a letting agent or property management company, you can generate income while retaining ownership of your asset.
The Lifetime Mortgage ‘Trap’
A lifetime mortgage involves borrowing a lump sum against your property’s value, repaid upon your death or when you sell the home. However, these agreements often require the sale of the property if you move into residential care, potentially forcing a sale during unfavorable market conditions or creating tax liabilities.
Seeking the Right Mortgage Provider
Selecting a suitable mortgage provider can avoid the necessity of selling your home. Some providers offer alternatives, such as converting the mortgage to a buy-to-let arrangement, allowing you to retain ownership and use rental income for care fees.
Dealing with Parents’ Care Needs
Discovering the need to sell a parent’s home to fund their care is often a last-minute and emotionally challenging decision. Having Power of Attorney or being a court-appointed deputy is necessary to manage these financial affairs. It’s prudent to arrange these legal authorizations well in advance.
The Importance of Professional Advice
Shockingly, only about 5% of individuals funding their own care seek financial advice. Consulting professionals can reveal various options and strategies, possibly preventing the need to sell the family home.
In summary, while the prospect of funding social care can seem overwhelming, understanding your options, discussing plans with family, and seeking professional advice can provide clarity and peace of mind. Remember, selling your home isn’t the only path and exploring alternatives can lead to more financially and emotionally favorable outcomes.