Can My House Pay For Care?

Independent Financial Adviser Peter McGahan advises whether equity release can fund care in later life.

A house is most people's biggest asset. Find out if a lifetime mortage could be used to meet long term care costs.

Property prices having soared over the last few years, I wanted to know if I could possibly release equity to fund care costs.

If you release any equity from your house - whatever that means - the cash will now be in your estate so there is no benefit. If you release an income by selling off some of your home, this will increase your income and as such will make you more liable to pay the costs. If you are required to pay the costs the local authority would simply take a charge on your property which is repaid on death or earlier sale of the property. I see no fundamental benefit to 'releasing equity' from your home.

What are the disregards?

Basically your house will be disregarded for the first twelve weeks of care in any event. The property will also be disregarded if: the persons care needs are classed as temporary; an incapacitated relative is living in the property; a relative aged 60 or over is living in the property or the spouse of the person who requires care is still living in the property.

There are a few ideas for you to consider:

Ensure you receive whatever benefits you are entitled to. If care is being received at home or in a residential home it’s likely you will receive attendance allowance. You would have to be over 65 and prove you need help and assistance with day to day activities to receive this.

Nursing contribution is another. This is normally payable to those who receive care in a nursing home. In October of 2007 it changes to one band of payment of £101 per week.

If your medical needs are particularly difficult, you may also be eligible to have your nursing home costs met by the NHS. From 1st October 2007 the criteria for this has also been made simpler.

If you did have to go into care and your other assets other than property were below the limit of £22,500, you could ask the local authority if you can take advantage of the deferred payment scheme where they take a charge on your property and your costs are repaid on death as mentioned above.

Remember to seek independent financial advice before acting on any planning.

Need Expert Advice?

Peter McGahan

Peter McGahan is an Independent Financial Adviser and Managing Director of Worldwide Financial Planning. Worldwide has won 16 Financial Times awards in the last four years. Peter has also been named the top media IFA of the year by Unbiased.co.uk in 2009.

Peter comments regularly in major journals such as the Mail on Sunday, Irish News and Sunday Times and is a weekly columnist for FT Adviser. He has also appeared on Working Lunch and the Today programme. In addition he is an expert on international tax matters for a range of international publications.

To ask Peter a question email connect@50connect.com, leave a comment below or visit the 50connect forum.

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Information given is for general guidance only, and specific advice should be taken before acting on any suggestions made. The above represents the personal opinions of Peter McGahan. All information is based on understanding of current tax practices, which are subject to change. The value of shares and investments can go down as well as up.

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