Long-term care funding

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Q An elderly relative of ours is going into residential care, and we’re concerned that this will involve having to sell her home.

A You’d surprised how often estate agents get asked about this – although strictly speaking it doesn’t really fall within our area of expertise.

Funding care fees can of course be an expensive business, and while I obviously don’t know your relative’s particular circumstances, from the tone of your question I’m assuming she is not in the fortunate position of having masses of savings to cover the cost. Consequently, I would suspect that her home will indeed come into the frame at some point.

Basically, the system works like this. Where a person’s capital (that is, excluding their home) is below a certain threshold - which in England and Northern Island is currently £23,250 – and their income, if any, is insufficient to meet care fees, then the local authority can assist with the costs for the first 12 weeks of permanent care. Any financial help beyond that period, however, will be in the form of a loan against the value of the patient’s home, with said loan being contingent on the property being put on the market immediately.

Alternatively, there is something called a Deferred Payment Agreement. With these, a loan to pay for care can still be made against the property, but without it having to be put on the market there and then. Obviously, this can be advantageous. Nevertheless, there is a limit to the amount the authorities will lend on this basis – and it could also adversely affect other means-tested benefit entitlements as well.

But isn’t there some kind of financial product designed to address this problem? Well, yes there is: it’s called an ‘immediate needs annuity.’ This can provide a regular and increasing income for as long as a person needs care, and which should cap the cost of that care from the outset. At the very least, this should mean that some of the value of your relative’s home will be protected.

However, I strongly recommend that you talk to an independent financial adviser who is a member of the Society of Later Life Advisers (SOLLA). They are the recognised specialists in the field of long-term care funding. You can see more at: societyoflaterlifeadvisers.co.uk