Equity Release on Mum's House?

bring_back_threepenny_bit

Hi,
A complex problem which I will simplify as far as possible.
My Mum is in her 90s, has mild dementia and healthcare needs which mean she now needs a live-in carer, at well over £1000pw. She is has savings of c.100k, plus main residence worth c700k and another house c800k. Income c20k. All 3 children have power of Attorney. 
I can forsee that she will soon burn through her savings, but won't then get free care as she will be asset rich but cash poor.
Sell or rent out the 2nd property would be the obvious answer. Here's the problem. Sibling A has lived in that house for many years, but latterly moved into Mum's house to act as carer. The 2nd property needs a sizeable sum spending to make it lettable, plus it is absolutely full of sibling A's stuff. Mum's wish was always that A could live there after she dies, and her will makes provision for that. Sibling A is seriously ill, cannot care for Mum any more and may not survive her.
None of the options look good:
Sell - would mean clearing out all of A's stuff, paying for storage, and telling them they'd have to rent somewhere after she passes, a kick in the teeth after they have spent the last few tears acting as unpaid carer. They have little savings or income.
Rent - as above, plus the re-wiring, maintenance, new windows/kitchen/bathroom etc that would be needed. Nor do siblings B & C really want to get involved in renting.
Both of the above would also take time and would probably destroy relations with A. So I then wondered about equity release. As things stand if Mum passes her main residence must be sold to pay IHT. There will be CGT on 2nd house, if and when sold.  I don't know whether it makes more sense to get Equity release from main or 2nd house? And much could depend, quite frankly, on who passes first. 
Would welcome some clear and informed thinking on this, especially any pitfalls of Equity release. 

Browntoa

Equity release is an expensive way to release money

Equity release , even if possible , would reflect the value of the property (reflecting it's poor state ) 

Unless the will has made use of trusts etc and is watertight then property B is still your mum's asset and if required to be sold to pay for care then you have no choice.

I'd look at the auction route , property B at auction will be a better and correct way to raise money for care . 

YBR

I'm afraid mum's wishes and Sibling A's expectations may need to change with their health situations.
Talk to them, start preparing them for this reality.

Keep_pedalling

The only person’s welfare that her attorneys have to look at are hers. Shift A’s stuff into storage (A will have to pay for this), sell the second house, pay any CGT due from the proceeds, and once the cash savings runs out use the proceeds to fund her live in careers. Obtaining ER is not in her best interests so is beyond the authority of the attorneys.

You mum is lucky that she has the assets that affords her to get professional care at home for many years, so will only have to go into residential care if her condition demands it not because her money has run out. 

Keep_pedalling

Just in case you are not aware, regardless of her wealth, you will be able to claim attendance allowance for her as she will be fully self funding her care. 

https://www.gov.uk/attendance-allowance

TBagpuss

As others have said, as attorneys you are legally obliged to act in her best interests - it sounds as though you can start by using her savings but if those run out then the next step would be to arrange to sell the second property, so it would be appropriate to warn A that that may be necessary. 

If either of the other children have any access to funds then it would potentially be possible for them to buy the property or to provide mum with a loan secured against her home, but obviously that is limited by their ability to raise funds, and you'd need to get advice to ensure that it was permissible.

Would it be possible for A to move back into mum's house, not as a carer but so they don't have to rent? As attorneys you are allowed to consider the donors wishes and it sounds as though there is good evidence that they wished to support A and provide them with a home, so allowing them to live rent-free in the same house as mum would be consistent with that. 
If mum passes first, then if the siblings are also the beneficiaries to the will then it would be open to then at that time to do a deed of variation to benefit A so they aren't stuck renting but can buy, or the beneficiaries could at that time allow A to remain in mum's house.

I think the problem with equity release is that it would be acting for A's benefit rather than Mum's - for Mum, the best option would be to sell the second house and use the funds for care 

GDB2222

There’s no CGT on the second house if it’s sold after mum dies. So, selling it now will generate an unnecessary tax bill. The attorneys can take that into account.

 Besides that, with only mild dementia, mum’s views should be sought and acted upon. If she doesn’t want sibling A to be turfed out, that’s her decision to make and it may be binding on the attorneys later, when her mind is less sound.

It’s sensible to plan ahead, but with £100k in the bank there’s a couple of years before the cash runs out. You can then assess mum’s health and decide what to do nearer the time. 

FrugalCat

With care fees as high as they are, it takes a hefty salary for someone's net take-home to exceed the costs of caring for their elders.

As a family, it's worth examining if any of Sibling B or C (or potentially their spouses or adult children) are lower earners for whom it makes sense to drop their job and care instead - it could be a win-win proposition for everyone. Mother happy being cared for by someone she knows, children preserving inheritance, carer increasing their added value (to £52k+ net a year).

Keep_pedalling

FrugalCat said:

With care fees as high as they are, it takes a hefty salary for someone's net take-home to exceed the costs of caring for their elders.

As a family, it's worth examining if any of Sibling B or C (or potentially their spouses or adult children) are lower earners for whom it makes sense to drop their job and care instead - it could be a win-win proposition for everyone. Mother happy being cared for by someone she knows, children preserving inheritance, carer increasing their added value (to £52k+ net a year).

You have obviously never had to care for someone with dementia. I can assure you that it is no win for the career. It is hard work and mentally and physically draining and it only gets worse as time goes by. 

bring_back_threepenny_bit

Thanks for all the useful comments. 
I'll rule out Equity release. Otherwise it all hinges on timing - ensuring that the house is sold before the savings run out. That gives us a good window before any irreversible steps have to be taken, and the situation may resolve itself by then. 
Keep_pedalling - many thanks for the info on attendance allowance, definitely one to follow up. I anticipate the difficulty in my mother's case is that that she has been completely outside the radar of social services up to now, my sibling was managing all her needs and they never asked for or claimed anything that they might have been entitled to. It may be hard to validate the 6 month threshold. 
A, if their health improves will certainly return to Mum's main residence and combining their care is a likely scenario. 
I've spent much of the last couple of weeks looking after Mum and won't be applying for the job full-time!

getmore4less

Any reason for them both not to move into the second home?

Cash in the main home or rent that out if more suitable.