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  • FIRST POST
    • SallyG
    • By SallyG 19th May 17, 4:08 PM
    • 829Posts
    • 189Thanks
    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 2
    • zagfles
    • By zagfles 20th May 17, 1:24 PM
    • 12,109 Posts
    • 10,054 Thanks
    zagfles
    And you can't gift it to someone else as that is deprivation of assets.
    Originally posted by dunstonh
    No it isn't, unless you could foresee the need for care at that time. The idea you're not allowed to spend your own money just because in the future you might need to pay care home fees or some other means tested benefit is ridiculous.

    See http://www.ageuk.org.uk/home-and-care/care-homes/deprivation-of-assets-in-the-means-test-for-care-home-provision/

    Foreseeability
    Annex E of the statutory guidance confirms it is unreasonable to decide you have disposed of an asset to reduce the level of care charges if, at the time the disposal took place, you were fit and healthy and could not have foreseen the need for care and support.
    • zagfles
    • By zagfles 20th May 17, 1:27 PM
    • 12,109 Posts
    • 10,054 Thanks
    zagfles
    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.
    Originally posted by Linton
    Yes some very odd maths in the BBC article!
    • woolly_wombat
    • By woolly_wombat 22nd May 17, 2:00 PM
    • 477 Posts
    • 277 Thanks
    woolly_wombat

    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
    The underlying principle may be valid but this policy was not properly thought through.

    I wonder why the polls are narrowing?!

    A major error by the Conservatives.
    • kidmugsy
    • By kidmugsy 22nd May 17, 3:08 PM
    • 9,449 Posts
    • 6,228 Thanks
    kidmugsy
    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.
    Originally posted by greenglide
    The papers aren't funded by a poll tax. And the idea that the BBC is even-handed is laughable.
    • zagfles
    • By zagfles 22nd May 17, 9:43 PM
    • 12,109 Posts
    • 10,054 Thanks
    zagfles
    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
    AIUI only his half of the value of the house would count, so there'd be a charge on the house of max half the value minus £100k, eg for a house worth £400k there'd be a £100k charge.

    Common sense would allow this charge to be moved to a new house, so if she wanted to move she could sell up and buy another house of the same value with the same £100k charge on it. Or, say, a £300k house and release £100k capital, and so get a £300k house with a £100k charge on it and £100k of cash. However that's common sense so it probably doesn't apply.
    • G4OJR
    • By G4OJR 22nd May 17, 10:10 PM
    • 6 Posts
    • 0 Thanks
    G4OJR
    You can take out a whole of life policy to cover an inheritance tax liability so why not have one to cover social care costs posthumously?
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