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Janet Davies: The role of “bricks and mortar money” in LTC funding

The Government needs to change the way it thinks about using property to fund long-term care.

It seems lobbying really can make a difference, to one half of the coalition at least. At the Liberal Democrat party conference in Glasgow earlier this month, care services minister Norman Lamb said he was looking to “strengthen” the role of regulated advisers as part of the Government’s long-term care funding reforms, as opposed to the current wording which signposts people to independent advice.

The need to signpost people to advice does not necessarily mean more advisers will need to work within the care fees planning arena; the 300 or so advisers already in this space nationwide are the ones best placed to pick up the gauntlet.

It does mean, however, that all those non-qualified advisers must stop rolling their eyes and glazing over at the very mention of long-term care. No-one wants advisers who only dabble in the long-term care market, but they should recognise they have a duty of care to their clients, both corporate and private. These advisers need to realise they have a fundamental part to play in completing a fact-find and referring clients with care needs to an adequately qualified advisers who are members of the Society of Later Life Advisers or Symponia, or ideally both.

For self-funders, many accept that money tied up in their homes can be put to good use.

If the house is the only asset, currently people can enter into “deferred payment agreements”, where the local authority secures a charge on the person’s home and on death the proceeds of the sale of the house are used to pay for care costs. 

Currently these loans are available but are interest-free until 56 days after death of the sale of the property, but after April 2015 will incur interest from the outset.

This “bricks and mortar” money, once realised, will enable a person full freedom of choice about where they receive their care and who delivers it. If moving into a care home is the best way forward money will always help with the care home selection process, although most care fees planning advisers can make the financial aspect blend into the background, leaving freedom of choice and welfare of paramount importance.

After April 2015 if people really do not want to sell their main property they will not have to, but – and it’s a big but – interest will be charged from the outset, well above base rate and from day one. The house will still have to be sold after their death to repay the debt, which depending on the length of stay in a care home could see the entire amount wiped out anyway, negating most of the reasons behind not selling it in the first place.

It would be much better for both the property owner and the intended beneficiaries to bite the bullet at the time, and seek and follow the appropriate financial advice. In most cases where the person takes up residency in a care home this means selling the property and establishing a bespoke care fees payment strategy. This provides everyone involved with a clear pathway, which in turn will mean the remaining capital can be safeguarded with financial legacies left intact.

It might be too much of a paradigm shift for some and I could be viewed as being too harsh here, but in reality a property should be viewed as just another form of currency, and in the case of the elderly needing care in a care home, this valuable currency can help them stay in complete charge of their care choices both pre and post April 2016 when the Care bill is fully introduced.

This change will happen slowly to start with but the baby-boomer generation gets to grips with their care needs, the whole concept of using property as just another form of cash to pay for long-term care will undergo a dramatic overhaul.  

Janet Davies is joint founder and managing director of Symponia

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