Eileen has always been fiercely independent – but, at 85, she is struggling to cope with everyday activities at home. She doesn’t want to go into long-term residential care if she can avoid it, but she cannot afford to pay for care at home. How could Equity Release help?
Eileen is not alone. Many people fear that they will have no choice but to sell the home they love in order to pay for long-term residential care. But ER could help them stay in their own home for much longer. It can be used to fund everything from home adaptations (such as a stairlift and accessible shower) to round the clock carers.
Could ER help you?
ER can make all the difference between maintaining or relinquishing your independence – and the longer you are able to keep your home, the more it could continue to grow in value.
You essentially get to have your cake and eat it – because you are spending the money tied up in your home, but still growing some capital to leave to your family when you die. There might even be an advantage to having equity release in place as it can be used to reduce that nasty Inheritance Tax when you pass away – but that is very much an individual assessment and depends on your personal situation. A good adviser would be able to give you an initial assessment.
Speak to an ER adviser
For anyone wanting to delay long-term residential care, ER is a great solution. But it is not a decision that should be taken lightly. Your ER adviser will guide you through the pros and cons, and your discussions should include some of the following points.
Are you receiving any benefits?
By increasing the amount of cash available to you, ER can affect your entitlement to means-tested benefits such as Pension Credit and Council Tax Support. Your adviser will help you decide on the best way forward. For example, will it be better for you to use ER to take a lump sum of £30,000 than to save £1000 a year in some form of State benefit? If you need a big cash injection now for various care needs at home, the lump sum is probably going to be a very attractive option.
Could your circumstances change?
None of us knows what the future holds. But if you have reason to think you may need to move into residential care fairly soon, ER may not be the best choice for you right now.
All ER loans must be repaid in full when the borrower (or in the case of a couple, the second person) leaves their home to go into full-time care or of course passes away. This usually means selling the home against which the loan has been made. Alternatively, family could use their own cash to repay the loan in order to keep the property if that was something they wished to do.
Is your property jointly owned?
As I’ve already mentioned: if you are a couple and only one of you goes into long-term care, the ER will not need to be repaid. The loan becomes repayable when the second, or last, owner dies or moves into long-term care.
Deliberate Deprivation of Assets
Care home fees are means tested. If you have capital/assets valued at over £23,250, you will be required to pay your fees in full.
Your local authority will only pay full fees if you have savings of less than £14,250 (although any income you receive will reduce the amount that the local authority pays).
ER reduces the amount of equity you have in your home – but it cannot be used to avoid paying care home fees.
Using ER to give your money away to family and reduce the amount of equity in your home can be seen as ‘deliberate deprivation of assets’ if you need to go into a care home within two years of taking the loan.
Plan ahead
As ever, it is important to plan ahead to make sure that your ER is put to the best possible use – and that it achieves everything you want it to. A good ER adviser will help you with this.
If you’d like to find out more, please get in touch by emailing mwade@accessequityrelease.com or calling 020 3840 5011.
