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Using a Lifetime Mortgage to release equity to pay for long-term care needs

Barry and Jan are in their late 70’s: “Although I am fit and healthy for my age, sadly Jan is in the early stages of dementia. I am worried about how I will be able to care for her at home, and cover the cost of moving her into a care home when the time comes. I really don’t want to leave our home where we have spent the last 42 years, as I feel it would be too stressful for her, and I want to keep Jan in familiar surroundings. Moreover we have friends and family in the area that are a great support.

We don’t have much in savings, just about £25,000 in our joint savings account and just enough pension to cover our modest cost of living. I want Jan to receive the best possible care and to be able to choose the location and quality of care home, rather than being dependent upon the local authority provision. I would also like to be able to pay for some care at home in the short term to give me a bit of help, and also to install a downstairs bathroom to make life easier for us both. Having done a bit of research on the internet I have been thinking of using the equity in our home to provide the help I need and adapt our house. Would a lifetime mortgage help me?”

Barry met their financial adviser from Apex CB Financial Planning to talk about the best way forward. The first thing he explained to Barry is that as there are two of them, if Jan goes into care, the home would be exempt from any assessment while Barry remained there. Homes are exempt if any relative who is under 16, over 60 or disabled still lives there. When it comes to long-term-care planning, equity release schemes can be useful, but only if you’re looking to fund care in your own home and you do not qualify for local authority support.

However, assets in cash are still taken into account as long as they’re in the name of the person in care. With this in mind, separating the jointly held cash savings into individual accounts might be a good idea, to make sure the council only assesses Jan’s share of the savings in the means test. As her share is less than £23,250 it is likely that she would qualify for full state assistance, and may well qualify for a grant or subsidised loan to pay for adaptations to the house. Following the meeting the adviser checked which State benefits could be claimed, and whether any grants could be claimed to help with the cost of home adaptations.

The problem with Equity Release is that any money released from the house and held in a joint account means Jan could have to pay for her own care. Furthermore if Barry definitely wants to go ahead with the loan, he must take care to show that he is doing it for “legitimate” reasons, and not to give away or spend it to avoid having to use it for care bills. Doing so is called “deprivation of assets”, and could lead to the council insisting he pay for care anyway – even if he has spent the money or given it away.

Although Barry is reluctant to sell the house the adviser pointed out that moving somewhere better suited to their needs might also improve Barry and Jan’s quality of life, and he has decided to look into this option.

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