15 Dec Selling a Property to Pay for Care
There are many misunderstandings regarding the issue of selling someone’s home to pay for care. So we have written an overview that gives some basic details and advice about how this works and things to consider.
Firstly, if you are selling a property on behalf of a relative who no longer has ‘capacity’ you will need to have a Lasting Power of Attorney, or be nominated as a Deputy by the Court of Protection. In both instances, you will also need to seek permission from the court as it is such a large transaction.
When a person goes into long term care, there is a statutory period of time called ‘the 12 week property disregard.’ This means that, during this time, the property is disregarded for the purposes of a financial assessment (although you will still be assessed on your other income and assets to pay towards your care). The purpose of the ‘property disregard’ is actually to allow some breathing space for the person (or relatives), to decide whether to sell the property, rent it out, or to decide whether the person is able to return home with a package of care.
A common misconception of the 12 week property disregard is that people think this is the length of time you are given to sell the property, which is not true.
After the 12 week period, and the person needs to remain in long term care, they (or their representatives), may then decide to sell the property. Alternatively, they may feel a better option is to rent the property out. However, whichever option is chosen, the property is then classed as an asset from thereon and included in the financial assessment.
If you decide to rent the property out, you can apply to your local authority for what is called a ‘Deferred Payment Scheme.’ This means that the local authority will agree to pay for any shortfalls in your care fees and place a legal charge against your property and this is sent to the Land Registry. They will then seek to recoup any monies owed to them when either the property is sold, or you pass away. Be aware, that each local authority will have specific criteria when it comes to entering into a Deferred Payment Scheme, and you will need to ask for a copy of this to see if you are eligible.
There are advantages and disadvantages to renting out a property, which need to be carefully considered.
One advantage is that you can gain extra income to pay towards your care fees, and also hold on to an asset that may increase in value during your time spent in care.
Disadvantages can include being responsible for the upkeep of the property and gaps in rental income if the property is empty at any time. You are also required to pay tax on any rental income you receive from the property.
It is always worth seeking independent, professional advice when considering the above option.