Quarter Of Homeowners Funding Social Care With Home Equity
Almost a quarter of homeowners are planning to use the equity in their homes to fund their care costs in later life.
24% of unretired homeowners would prefer to use the equity in their homes than deplete their pension pot when looking to fund the costs associated with old age.
The research also indicated that fewer people are looking to downsize by choice and would prefer to remain in their homes indefinitely. 85% of unretired respondents would like to continue living in their current property, this figure has risen by 3% in the past year with many deterred by Brexit delays and political instability.
Whilst political uncertainty permeates throughout society, fewer people are looking to leave their homes, preferring to use the equity as opposed to other later life income streams.
In fact, confidence in pension funds seems to be dwindling in the modern world. With many assuming their pension would be unable to cover the cost of later life, under a third (32%) are reliant on this money, a figure which has fallen by 5% when compared with a year ago.
Many still remain confused as to how they will confront and approach later life spending with 24% unsure as to how they will fund their care in later life, increasing from 18% in 2018.
As society remains uncertain, people are looking to the money locked within their homes as a tangible solution. 40% of homeowners are likely to unlock money in their homes at some point in the future whilst 23% more homeowners used equity release in the second half of 2018 in comparison to the first half; a figure likely to improve in the future.
Alice Watson, head of marketing and communications at Canada Life Home Finance, said:
“With the future of long-term care in the UK still not clear, people who view their wealth holistically are increasing their ability to fund later-life care options. These findings are a real vote of confidence in the home finance industry: consumers are clearly attracted to the flexibility and security offered by later life mortgages.
“We know how much people value being able to live in the comfort and familiarity of their home. When care provision is in question, the disruption and emotion of someone having to leave their home is best avoided if at all possible. With lifetime mortgages, homeowners can age in place, while accessing the cash that will allow them to fund care solutions for them or their loved ones.
“These findings are significant because they reflect the views of those soon to enter retirement, many of whom will be contemplating some of the challenges later life may bring. It is really important that people speak to an independent financial adviser when deciding whether to use equity release to pay for care cost
Thy Will Be Done can protect your home with a Trust which in so doing means that it won’t be included in any future Local Authority (LA) assessment and therefore will not have to be sold to pay for your care and you will also not need to take equity release from it to pay for care either. If your assets other than your home are below £14,250 you will then receive full funding by the LA for your care and your appointed attorneys can then rent out the property and the resulting income be used to give you a better quality of care than you would otherwise have got with a basic grant. This means the property works for you instead of being a liability and stays within the family to be left to beneficiaries when you die. As Property in a Trust does not go through probate then your home will belong to your beneficiaries the moment you pass away avoiding probate altogether and by consequence the proposed new probate fees being considered for introduction in the Summer of 2020 which will save up to £6k depending on the size of your property.
Deliberate deprivation of assets must be considered at all times.
A person or persons wishing to set up such a trust must firstly not have been diagnosed with any medical condition that would give them reason to believe that going forwards they may need to go into care.
Also, there must be significant and pertinent reasons for setting up the trust other than simply wishing to avoid future care fees.
Such reasons could be on or more of the following;
- Wanting to ensure that if they died and left everything to their spouse and that spouse remarried that there would be protection for the children if the surviving spouse then died preventing the future spouse inheriting everything and the children of the original marriage getting nothing. This is called MAD (Marriage after death) or sideways disinheritance.
- Wanting to ensure that if any beneficiaries were to divorce in the future that they could not lose any part of the value of their inheritance in a future divorce.
- Blood line inheritance ensuing that if a beneficiary were to pass away that their inheritance could only pass to their own children and not a spouse or partner.
- Wanting to ensure that the new probate fees being considered for introduction in the summer of 2020 are avoided through the use of the trust.
- Wishing to be inheritance tax efficient for future generations.
And the list is not just restricted to the above examples there are many more that could be added.
For the avoidance of any doubt in the future and to ensure that there are no reasons for a LA to believe that any deliberate deprivation of assets had historically occurred we write very clearly within the trust the exact reasons why the trust is being set up.
When a Local Authority then looks at;
- A) When the Trust was created
- B) When you started to receive care
- C) Your medical records to determine when the reason for entering care was first diagnosed
- D) The Trust document itself
You will have your home disregarded from any local authority assessment as a bi-product of the creation of the trust NOT because it was the sole and overriding reason for setting up the trust initially.
Don’t forget any assets above £14,250 will be taken into consideration regarding funding, therefore having piles of cash in your bank account from an equity release arrangement is definitely NOT a good idea.
I’m Paul Blackmoore and I’m the sole Director of Thy Will Be Done.
Why not have a chat with me and I will show you all the options open and available to you.
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