Will trust and equity release or alternatives ?

zak999

Hi,

dad deceased and left half family home to me and sister in trust.  Elderly mum is in care at home and we need to raise some funds to contribute to financing care. Her savings are steadily reducing to local authority threshold but it’s unlikely their help will cover care costs we feel are needed.

equity release broker says we need to break up will trust but I imagine that risks consuming existing trust half in care costs if she ends up in a care home.  

Are there any other options open to us please ?

rgds

Keep_pedalling

The normal thing to do would be to sell the house to release her share of the home to pay her care costs. Any reason why that is not possible? Is anyone living in the house?

Did your father’s will state what was to happen to the trust in this situation? The options would be for the trust to end or that she would continue to benefit from any income the trust earned with the capital protected for the eventual beneficiaries. 

MWT

Keep_pedalling said:

The normal thing to do would be to sell the house to release her share of the home to pay her care costs. Any reason why that is not possible? Is anyone living in the house?

I think this bit is the issue...

zak999 said:

Elderly mum is in care at home and we need to raise some funds to contribute to financing care. 

I took this to be care at home, not care in a care home...

zak999 said:

equity release broker says we need to break up will trust but I imagine that risks consuming existing trust half in care costs if she ends up in a care home.  

Yes, you have a number of risks attached to breaking the trust, but I suppose the real question is what would your father have wanted in this circumstance?

Too often people are sold on the wonderful idea of protecting the inheritance without considering the flip-side which is limiting the ability of a survivor to leverage the assets for their own care and comfort.

If you want to go down the path of equity release then your mother is going to need undivided ownership of the property in her name and of course that means your potential inheritance may be consumed in whole or in part either by the equity release growing over time, or by the sale proceeds being consumed by further costs if she has to go into a care home...

Can you put some numbers on this to give an idea of the scale of what could be raised from equity release?

Reason I ask is will equity release really provide a full solution or are you just putting of the inevitable and a sale and move to a care home would be the better option? Much depends on just how much home support she needs and will need, and for how long...

Could you and your sister consider buying her half of the property from her, raising a mortgage for example if needed? ... but again, would this give her enough funding or is she still going to run short before long...

Keep_pedalling

Ah yes, sorry I did not read the opening post correctly. This is a difficult situation, I don’t believe any form of equity release is going to be available while a portion of the house is held in trust. 

Are you currently using carers arranged privately rather than through the LA? 

zak999

Keep_pedalling said:

The normal thing to do would be to sell the house to release her share of the home to pay her care costs. Any reason why that is not possible? Is anyone living in the house?

Yes she is living in the home.  She receives care at home.  She’s deemed early stage end of life so we want to release equity to cover home care costs. 

zak999

Keep_pedalling said:

Ah yes, sorry I did not read the opening post correctly. This is a difficult situation, I don’t believe any form of equity release is going to be available while a portion of the house is held in trust. 

Are you currently using carers arranged privately rather than through the LA? 

Yes private care, they are very good.  We are undergoing LA assessment for support but don’t suppose she’ll get much help as her funds still just above the £23.5k threshold and it’s a non LA care agency.  

zak999

MWT said:

Keep_pedalling said:

The normal thing to do would be to sell the house to release her share of the home to pay her care costs. Any reason why that is not possible? Is anyone living in the house?

I think this bit is the issue...

zak999 said:

Elderly mum is in care at home and we need to raise some funds to contribute to financing care. 

I took this to be care at home, not care in a care home...

zak999 said:

equity release broker says we need to break up will trust but I imagine that risks consuming existing trust half in care costs if she ends up in a care home.  

Yes, you have a number of risks attached to breaking the trust, but I suppose the real question is what would your father have wanted in this circumstance?

Too often people are sold on the wonderful idea of protecting the inheritance without considering the flip-side which is limiting the ability of a survivor to leverage the assets for their own care and comfort.

If you want to go down the path of equity release then your mother is going to need undivided ownership of the property in her name and of course that means your potential inheritance may be consumed in whole or in part either by the equity release growing over time, or by the sale proceeds being consumed by further costs if she has to go into a care home...

Can you put some numbers on this to give an idea of the scale of what could be raised from equity release?

Reason I ask is will equity release really provide a full solution or are you just putting of the inevitable and a sale and move to a care home would be the better option? Much depends on just how much home support she needs and will need, and for how long...

Could you and your sister consider buying her half of the property from her, raising a mortgage for example if needed? ... but again, would this give her enough funding or is she still going to run short before long...

Interesting.
 
I hadn’t considered buying it with a remortgage.  So Mum would then self fund her care with the proceeds with Sister and myself as her POA advocates.  

the property is a bit run down but perhaps worth in the region £500k to £600k

so our half £250 to £300k.  Both sister and myself are retired, she has zero assets and low pension.  I’m a bit better off, I’d need to ponder some complications re possibility of buying the other half.  Eg I already have a relatively recent remortgage (for own home insulation, windows , repairs etc) on a BTL rental property so that would leave me with 2 remortgages to pay although the BTL is covered with long term tenants.  Without an income from Mums home I guess it would be hard to remortgage ?

 On reflection of what you’ve said I perhaps wish I’d sold the BTL and bought Mums share. 

Mum is 97 and deemed early stage end of life, wants to stay at home.

MWT

zak999 said:

the property is a bit run down but perhaps worth in the region £500k to £600k

so our half £250 to £300k.  Both sister and myself are retired, she has zero assets and low pension.  I’m a bit better off, I’d need to ponder some complications re possibility of buying the other half.  Eg I already have a relatively recent remortgage (for own home insulation, windows , repairs etc) on a BTL rental property so that would leave me with 2 remortgages to pay although the BTL is covered with long term tenants.  Without an income from Mums home I guess it would be hard to remortgage ?

 On reflection of what you’ve said I perhaps wish I’d sold the BTL and bought Mums share. 

Mum is 97 and deemed early stage end of life, wants to stay at home.

Thanks for the extra information, and I can certainly empathise with everything you are going through as a family. My father-in-law recently passed at 93 after a year in a care home following a longer period of care at home. 

From what you have said so far, breaking the Trust may be the most achievable option, but obviously it puts your inheritance at risk, although with the details you've given on age and health, the risk might be considered to be low perhaps?

Have you got as far as getting the property valued by one of the equity release providers? ... reason I ask is you mentioned the property is a bit run down and this can be a red-flag for the lenders, but in the circumstances they would also consider her health and age as mitigating factors.

The biggest issue that would concern me is if her condition deteriorates further and she has to go into a care home that would trigger the requirement to sell the house to repay the equity release loan with a relatively short time window.

If you go down the equity release path look at getting a drawdown facility in place rather than a large lump-sum, so you keep the amount owed under control and that may help with alternative options when it comes time for the loan to be repaid, depending of course on how far in the future that is...

You mentioned a POA, is it an already active EPA or an LPA? (presumably you have both health and finance?).

zak999

MWT said:

zak999 said:

the property is a bit run down but perhaps worth in the region £500k to £600k

so our half £250 to £300k.  Both sister and myself are retired, she has zero assets and low pension.  I’m a bit better off, I’d need to ponder some complications re possibility of buying the other half.  Eg I already have a relatively recent remortgage (for own home insulation, windows , repairs etc) on a BTL rental property so that would leave me with 2 remortgages to pay although the BTL is covered with long term tenants.  Without an income from Mums home I guess it would be hard to remortgage ?

 On reflection of what you’ve said I perhaps wish I’d sold the BTL and bought Mums share. 

Mum is 97 and deemed early stage end of life, wants to stay at home.

Thanks for the extra information, and I can certainly empathise with everything you are going through as a family. My father-in-law recently passed at 93 after a year in a care home following a longer period of care at home. 

From what you have said so far, breaking the Trust may be the most achievable option, but obviously it puts your inheritance at risk, although with the details you've given on age and health, the risk might be considered to be low perhaps?

Have you got as far as getting the property valued by one of the equity release providers? ... reason I ask is you mentioned the property is a bit run down and this can be a red-flag for the lenders, but in the circumstances they would also consider her health and age as mitigating factors.

The biggest issue that would concern me is if her condition deteriorates further and she has to go into a care home that would trigger the requirement to sell the house to repay the equity release loan with a relatively short time window.

If you go down the equity release path look at getting a drawdown facility in place rather than a large lump-sum, so you keep the amount owed under control and that may help with alternative options when it comes time for the loan to be repaid, depending of course on how far in the future that is...

You mentioned a POA, is it an already active EPA or an LPA? (presumably you have both health and finance?).

Thanks so much for your thoughtful reply. Some helpful info there. I struggle with the poa terms but we have the more recent version and yes it’s health and finance. 

Good idea to explore if equity release is actually possible. 

The risk of breaking the trust and uncertainty re longevity and care home is indeed worrying. 

I guess not but I wonder if care agencies ever do care with deferred payment.  A friend whose mother was longish term in a care home negotiated a huge discount with them when her money ran out allowing her to stay til the money ran out.  

MWT

zak999 said:

I guess not but I wonder if care agencies ever do care with deferred payment.  A friend whose mother was longish term in a care home negotiated a huge discount with them when her money ran out allowing her to stay til the money ran out.  

My mother-in-law was able to get a 12 month deferral of part of her care home fees while she was selling her home, but it was conditional on the home being actively on the market.

Can always ask, but I doubt you would find a home care agency willing to do the same.

Whatever you do from here, do keep in mind that you have potentially conflicting obligations between the LPA which requires you to make decisions in her best interest, and your own, understandable, concerns about the trust. If you do consider buying her half of the property talk to your solicitor about the issues around an attorney acquiring assets from the donor, unless this was specifically provided for in the LPA.

You have some difficult decisions to make and unfortunately this sort of problem is the direct result of people taking steps to try and avoid their entire home being used for future care fees, without considering that it also prevents their surviving spouse from getting the care they may need.

Not your fault, but you still have to deal with it...