If you or your parent or relative needs permanent long term care in a care home and you are assessed for having to pay for your own care, but most of your capital is tied up in your former home, instead of having to necessarily sell it, you could apply for a Deferred Payments Scheme providing:-
So if your other assets are significantly more, this scheme will not be available (at least until they do fall below any future thresholds) and therefore you will need to look at alternative means of paying for care
Please note this scheme only applies to your main principal residence. If you have other investment property or a holiday home, these will not qualify.
Well it is like an IOU where instead of being forced into selling your home immediately, you can keep it (possibly to rent out to help meet care fees) and you can ask your local authority to pay the care fees for you instead until you eventually decide to sell your home or you die. As such they can be used either as a type of bridging finance until you manage to sell the property or as a longer term strategy to delay or even avoid having to sell any home during the person’s lifetime.
These schemes should be offered to anyone who they deem needs to be a self-funder providing their other assessable capital is below the respective threshold and has still not sold their principal private home in the 12 week property disregard period. However, you have to apply and the Local Authority retains the right not to offer it but if they don’t, they do have to tell you why in writing.
Deferred Payments scheme are not automatically granted, you have to apply to your Local Authority.
If granted your Local Authority undertakes to pay your care fees for you to the care home (until you sell your home or die) when they will recover the debt from the sale proceeds.
They secure this ongoing debt by placing a legal charge on the property so it can’t be sold without your solicitor repaying any debt from the sale proceeds.
In the meantime, to avoid potentially very large bills your Local Authority will expect you to pay them all of your income bar a Personal Expenses Allowance (currently £24.90 p.w. (England) £28.50 p.w. (Wales) or £27.00 p.w. (Scotland) – 2018/19 ). Should you want to rent out any former home and your local authority agrees to it, they will also expect to receive any rental income. Whilst this means you will not immediately benefit from any such rental income, any money paid to the Local Authority reduces the debt created which in turn means you need to repay less.
There is no definite time limit to such schemes but the Local Authority will occasionally write to you and ask your intentions regarding selling the property and they will not allow any debt to exceed a certain % of the property’s value (normally around 80%). They will, therefore ascertain any property’s value at outset and depending on how long any scheme runs for along with changes in property value, will possibly seek fresh revaluations from time to time.
For setting up a Deferred Payments Scheme you will need to pay for the legal and administrative costs involved in creating a legal charge on your property, plus initial and periodic valuation fees.
You will also be obliged to keep any property fully insured (which can be expensive and difficult to obtain if it is to remain unoccupied) and maintained including routine work like cutting any grass etc. For this reason you may decide that it is still easier just to sell the property, but in this case any value realised would be counted in any means test see State Funding.
As part of Care Act 2014 reform of Long Term Care funding in England, this deferred payments scheme has been improved and is now referred to as the Universal Deferred Payments Scheme..
This is similar to the old scheme but is designed to be accessible to more people as although the non- property capital threshold remains the same as the old scheme £23,250 (2018/19), now all English Local Authorities are obliged to make this available (subject to the property being suitable).
Under the new scheme you will also be allowed to:-
However there are some fundamental differences to the old scheme including:-
Any existing old schemes can continue interest free for as long as required. Local Authorities are not allowed to start applying interest to them just because the rules allow them to apply it to new schemes from April 2015.
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