Beneficial interest in the valuation of a home in LA care financial assessment

larachantie

My widowed mother owns her own leasehold home outright. She is in poor health and on a low income with no savings so we expect that she may eventually go into a care home.  After about two years of living in a care / nursing home there will be no equity in the home to pass onto her children as per her will.  I understand that the Local Authority will either put a charge on the property straight away or accept a deferred arrangement.  Prior to all of this she has got into arrears of service charge and ground rent and in order to undo a court order for possession all/some of her children are prepared/able to loan the money to pay the debt and costs. The court application can, if necessary, reveal the source of the repayment.  The loan is about 10% of the value of the property.  A written loan agreement will be set up.  Based on her current income, not much of the loan will be repaid before she is likely to go into care.

Our question is whether the loan from her children can be offset – less any repayments - when in the future the local authority works out what it can take from the value of the home?  If I understand matters, the "creditors" seem to have a beneficial interest in the property as they paid for its retention (and its existence to be used by the LA for funding) even if they are not the legal owners.  Thus, when the estate is worked out the loan is repaid to the “creditors”?  Another option might be to put a legal charge on the property but this seems a big step.

I should stress that the answer in no way affects whether the children make the loan, but it would be good to know if can be repaid eventually from her estate / sale.  I also appreciate that for a definitive answer we would need legal advice and even then it may be hard work when we eventually deal with the LA, but some general views would be appreciated.

Keep_pedalling

If she has debts then they would be included in any financial assessment. My main concern here would be that she appears to asset rich but cash poor so is not in a position to maintain her home or have the means to maintain / improve the quality of her life and that could lead her to end up in care long before she would if she was in a better financial position. Would she consider selling up and moving into something like assisted living or sheltered housing?

How long is the current lease?

Spendless

I would take professional legal advice before any of this lady's adult children part with any money especially if she's close to going into a care home. None of them want to be paying out money they won't get returned as other powers scream they're owed money in debts and care costs. 

larachantie

Keep_pedalling said:

If she has debts then they would be included in any financial assessment. My main concern here would be that she appears to asset rich but cash poor so is not in a position to maintain her home or have the means to maintain / improve the quality of her life and that could lead her to end up in care long before she would if she was in a better financial position. Would she consider selling up and moving into something like assisted living or sheltered housing?

How long is the current lease?

Thanks.  On the debt itself the guidance I read seems vague.  Secured debts are clearly taken into account but there seems to be less clarity around unsecured, albeit, formally written debts.  Do you have any sources?

On the sustainability point she already lives in warden assisted sheltered housing and her income just about covers outgoings including service charges and the current LA in house subsidised care package.  The debt is an old one from 2019 mainly from the previous managing agents before the family stepped up its support and it's only just come to light as it was not chased from 2019 until recently. 

BTW still 98 years left on the lease.

Keep_pedalling

Unsecured debts are taken into account, but to formalise a family loan I would register a charge against the property.