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  • FIRST POST
    • SallyG
    • By SallyG 19th May 17, 4:08 PM
    • 837Posts
    • 194Thanks
    SallyG
    Carefree care fee planning?
    • #1
    • 19th May 17, 4:08 PM
    Carefree care fee planning? 19th May 17 at 4:08 PM
    http://www.bbc.co.uk/news/business-39977559

    One way to avoid your property wealth being consumed by care bills might be to take equity out of your house ahead of time.
    With equity withdrawal, an insurance company will give you a portion of the value of your house now, charge interest on that amount until you die and take the money you owe them out of the eventual sale proceeds of the house.
    To take the above example - an insurance company lends you £200,000 against your house aged 65, charges 5% interest a year until your eventual death at 90. You now owe them £200,000 plus 25 years' interest at 5%, which equals £359,000.
    If your house price stays flat, that only leaves £141,000 left in equity. If, as the government proposes, you are allowed to keep £100,000, that means your liability or your own social care is only £41,000 rather than £400,000.

    Have they thought it through?
Page 1
    • dunstonh
    • By dunstonh 19th May 17, 4:37 PM
    • 89,599 Posts
    • 56,078 Thanks
    dunstonh
    • #2
    • 19th May 17, 4:37 PM
    • #2
    • 19th May 17, 4:37 PM
    Have they thought it through?
    yes because suddenly you have a great big chunk of capital in your bank account. You haven't changed the net position of your assets.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • NotSkint
    • By NotSkint 19th May 17, 4:40 PM
    • 53 Posts
    • 51 Thanks
    NotSkint
    • #3
    • 19th May 17, 4:40 PM
    • #3
    • 19th May 17, 4:40 PM
    Wouldn't the £200,000 equity release be classed as an asset?
    Personally I am in favour of the policy; my in-law paid for her own residential care for two years before passing. If the assets are there then surely they should be used. Why should the tax payer pay.
    Some see it as a hidden inheritance tax but I quite like the idea myself.
    • Linton
    • By Linton 19th May 17, 4:55 PM
    • 8,496 Posts
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    Linton
    • #4
    • 19th May 17, 4:55 PM
    • #4
    • 19th May 17, 4:55 PM
    Some major snags with your little scheme:
    - You wont get a rolled-up lifetime mortgage for more than about 30% of the value of your house at 65
    - Lifetime mortgage interest rates are significantly higher than those for normal pre-retirement repayment or interest only mortgages. There are only a small number of providers.
    - I dont agree with your repayment calculations. 25 years at 5% compound interest amounts to a factor of 3.39 giving the repayment at death at 90 as £678000. Even if the mortgage was on an interest only basis the cost of the interest alone would be 25 X 0.05 X £200K=£250K
    - The chances are that any care costs will be far less than the interest paid.
    - What do you do with the £200K? You cant keep it as it would put you well above the £100K limit.
    - Taking out a lifetime mortgage may significantly reduce your options well before you need care.
    • dunstonh
    • By dunstonh 19th May 17, 5:16 PM
    • 89,599 Posts
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    dunstonh
    • #5
    • 19th May 17, 5:16 PM
    • #5
    • 19th May 17, 5:16 PM
    - What do you do with the £200K? You cant keep it as it would put you well above the £100K limit.
    And you can't gift it to someone else as that is deprivation of assets.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Keep pedalling
    • By Keep pedalling 19th May 17, 5:17 PM
    • 3,948 Posts
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    Keep pedalling
    • #6
    • 19th May 17, 5:17 PM
    • #6
    • 19th May 17, 5:17 PM
    Well I suppose you could always blow the released equity on living it up for a few years, but it would be a hell of a come down when you move into a LA funded care home instead of being able to afford a better choice.
    • AlanP
    • By AlanP 19th May 17, 5:17 PM
    • 961 Posts
    • 680 Thanks
    AlanP
    • #7
    • 19th May 17, 5:17 PM
    • #7
    • 19th May 17, 5:17 PM
    I don't think it is the OPs little scheme, rather a direct quote from the BBC article which, in the main, posed various scenarios about how the new "rules" could be interpreted given the limited information so far.
    • SallyG
    • By SallyG 19th May 17, 5:18 PM
    • 837 Posts
    • 194 Thanks
    SallyG
    • #8
    • 19th May 17, 5:18 PM
    • #8
    • 19th May 17, 5:18 PM
    You're right - not my scheme - I should have put quotation marks around it - it is a quote from the BBC article - every now and again I try to discover whether some financial guru claims are actually true ........
    Last edited by SallyG; 19-05-2017 at 5:20 PM.
    • Browntoa
    • By Browntoa 19th May 17, 5:20 PM
    • 31,883 Posts
    • 37,610 Thanks
    Browntoa
    • #9
    • 19th May 17, 5:20 PM
    • #9
    • 19th May 17, 5:20 PM
    I'd love to see figures for the number of people whos house actually gets swallowed up in care fees

    I think the fear outweighs the reality

    And I'd rather live in a decent care home personally
    I'm the Board Guide of the Referrers ,Telephones, Pensions , Shop Don't drop ,over 50's and Discount Code boards which means I volunteer to help get your forum questions answered and keep the forum runnning smoothly .However, please remember, board guides don't read every post. If you spot an inappropriate or illegal post please report it to forumteam@moneysavingexpert.com Any views are mine and not the official line of MoneySavingExpert.
    • Cacran
    • By Cacran 19th May 17, 7:18 PM
    • 406 Posts
    • 248 Thanks
    Cacran
    I am feeling a bit confused. As it is now, if you go into a home and have more than a certain amount in savings, you have to pay for your care, if you have a bit less in savings, you pay a reduced amount. Am I right about that?
    If you have a property and the co owner is alive and living in it, they don't take your house from you, is that right?
    If you live in the house alone then they will take your house. Is that right?
    How do new proposals affect things. I think I have understood, but not sure.
    Keep on trucking!
    • Mojisola
    • By Mojisola 19th May 17, 7:38 PM
    • 28,542 Posts
    • 72,689 Thanks
    Mojisola
    I am feeling a bit confused.

    As it is now, if you go into a home and have more than a certain amount in savings, you have to pay for your care, if you have a bit less in savings, you pay a reduced amount. Am I right about that?

    If you have a property and the co owner is alive and living in it, they don't take your house from you, is that right?

    If you live in the house alone then they will take your house. Is that right?
    Originally posted by Cacran
    No-one takes your home! If you are assessed as having more than the capital allowance, you have a contract with the care home and have to pay the bill - if your income, benefits and savings don't cover the bill, you may have to sell your house.

    If you need residential care and a spouse (or certain other people) live in the home, its value is ignored.

    If you are funded by the council, you contribute your pension(s) towards the costs. You are allowed to keep just over £20 a week for incidental expenses.
    • AlanP
    • By AlanP 19th May 17, 8:57 PM
    • 961 Posts
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    AlanP
    A major part of the new proposals is that the value of the house will be taken into account when the cost of Home Care is worked out, not just Residential Care as at present.

    A lot more people have some kind of Home Care compared to the number that go into Residential Care, which is typically required when home care isn't enough anymore.

    Result - More people are likely to be affected, although as a proportion of those will not need residential care (pass away at home), and home care is cheaper expect the headlines* to be along the lines of:

    "New scheme means pensioners get to leave more for their beneficiaries than under old scheme" as average per pensioner will be lower.

    *I'm sure the DM / Sun / party political broadcast will come up with punchier headlines.
    • LHW99
    • By LHW99 19th May 17, 9:50 PM
    • 963 Posts
    • 813 Thanks
    LHW99
    Could encourage more people to consider Immediate Care Needs Annuities earlier rather than gamble on dying before the money runs out.

    £100k seems a reasonably generous level IMO, compared with the approximately £23k it has been. As NotSkint says, why shouldn't people pay for their own care to the extent they can, rather than expecting it to be picked up by the general taxpayer.
    • kidmugsy
    • By kidmugsy 19th May 17, 10:21 PM
    • 9,850 Posts
    • 6,643 Thanks
    kidmugsy
    it is a quote from the BBC article
    Originally posted by SallyG
    So it's a quote from a gang dedicated to opposing Mrs May by foul means or foul. I'm no fan of Mrs May, but I'm even less a fan of the BBC's corrupt politics.
    • greenglide
    • By greenglide 19th May 17, 11:13 PM
    • 2,898 Posts
    • 1,868 Thanks
    greenglide
    , but I'm even less a fan of the BBC's corrupt politics.
    But the foot high headlines full of lies and drivel put out by the Mail and its friends are ok?

    BBC generally puts both sides of the argument. The printed media tend just to put one side aimed at whipping up their target audience.
    • dunstonh
    • By dunstonh 20th May 17, 12:30 AM
    • 89,599 Posts
    • 56,078 Thanks
    dunstonh
    But the foot high headlines full of lies and drivel put out by the Mail and its friends are ok?
    Depends on your perspective. If you are a Daily Express reader you probably think the Daily Mail is too bland and left wing

    BC generally puts both sides of the argument. The printed media tend just to put one side aimed at whipping up their target audience.
    I would agree with you with most of their content. Sometimes, the odd editorial can let them down though.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Teaandscones
    • By Teaandscones 20th May 17, 6:52 AM
    • 117 Posts
    • 96 Thanks
    Teaandscones
    If you need residential care and a spouse (or certain other people) live in the home, its value is ignored.
    Originally posted by Mojisola
    But not under the conservative proposals anymore.

    Say a widow had been caring for her late husband for the best part of a decade with the assistance of carers but then for the last 3 years of his life he went into nursing care.

    Under the current system, the value of the house would be ignored and after her husband's death she could then sell up and move to be closer to her grandchildren.

    Under the new system the value of the house will count so that there is likely to be a £200k charge against the house presumably increasing by RPI every year. Though she won't be homeless, she probably won't be able to move and if she lives another 10 years, inflation will probably have whittled the 100k left in the estate to nothing.
    • Sea Shell
    • By Sea Shell 20th May 17, 7:13 AM
    • 415 Posts
    • 399 Thanks
    Sea Shell
    I'm assuming this will apply to anyone needing home/residential care, regardless of age.
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow "
    • bigadaj
    • By bigadaj 20th May 17, 10:03 AM
    • 10,711 Posts
    • 7,005 Thanks
    bigadaj
    But not under the conservative proposals anymore.

    Say a widow had been caring for her late husband for the best part of a decade with the assistance of carers but then for the last 3 years of his life he went into nursing care.

    Under the current system, the value of the house would be ignored and after her husband's death she could then sell up and move to be closer to her grandchildren.

    Under the new system the value of the house will count so that there is likely to be a £200k charge against the house presumably increasing by RPI every year. Though she won't be homeless, she probably won't be able to move and if she lives another 10 years, inflation will probably have whittled the 100k left in the estate to nothing.
    Originally posted by Teaandscones
    Don't see anything wrong with that.
    • LHW99
    • By LHW99 20th May 17, 11:23 AM
    • 963 Posts
    • 813 Thanks
    LHW99
    So the option would be to sell up and move earlier, using some of the funds to subsidise the husbands care (still not the full cost, as he would presumably have full level attendance allowance) for the 3 years, maybe through an insurance policy. There is then no loan increasing by RPI and the whole remaining estate can be inherited, or used to fund her care later if needed.
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