Equity Release

[gemini]

Hi Everyone

I was hoping someone could give me some advice about equity release. My Mum in law was diagnosed with Alzheimers about 5 years ago. She has recently took a dramatic decline and her consultant says that we should now start to look for a care home for her with a view to her being admitted within the next 6 to 12 months. He was concerned when we told him that she lived in her own home which she owned outright. He suggested we should look into ways to release the equity in her property now, so that when the time comes she will avoid having to pay home care charges.

Can any advise how this could work and if it is legal? The last thing we want to do is distribute her 'assets' between her children (my husband included) only to find that it has to be returned if Social Services feel her assets have been dispursed in a deliberate attempt to avoid charges. We really don't know how the 'charges' system works? Any advice would be most grateful

Best Regards
Gemini

 

[sue38]

Hi Gemini,

There are different types of equity release schemes but the basis of all of them is that your mother-in-law would receive a lump sum from the finance company. She would then be giving this lump sum to her children and as such could be seen to be deliberately depriving herself of assets.

I don't know how much your mother-in-law understands but to do an equity release she would be signing a mortgage or a transfer or some other legal document. Does she have the mental capacity to do this? Even if someone has EPA for her most financial institutions would be reluctant to accept a mortgage deed signed under an EPA.

Sorry if this sounds negative but a seems a bit of a no-go to me.

 

[christine_batch]

Dear Gemini,
As my husband is in last stage in N.H. I looked into Equity Release.
I was informmed that if I took out say £50,000, my husband would have to have half.
My daughter who has Power of Attorney, would have to sign for my husband.
So I decided not to go down that route.
If you ring Alzheimer's Legal Department they have excellent advice to give.
Best wishes
Christine

 

[Sandy]

Hi gemini,

Age Concern has a very good factsheet on deprivation of assets. The factsheet is in PDF format and can be found here:

http://www.ageconcern.org.uk/AgeConcern/Documents/TRANSFEROFASSETSFS40JUN07.pdf

Take care,

Sandy

 

[Grannie G]

I have just looked at the link Sandy and am a bit confused by;

Quote
a lump sum payment such as a gift or to pay off a debt;Unquote

I understand about the gift but the debt? I hope this means another`s debt and not one`s own.

 

[jenniferpa]

I must confess I find it ironic that it is the consultant that is giving this advice. I wonder if he would be quite so gung ho about encouraging his patients to some how squeeze money out of the NHS if they weren't entitled to it. Don't get me wrong: I do think the current system is unfair, but it is the current system and from everything I've read, an equity release scheme is certain to put you squarely into the "deprivation of capital" box. Personally, I think everyone with a diagnosis of a terminal illness such as AD clearly should be cared for using NHS funding, but that's not what happens. I just wonder how many other people he's said this to who have gone ahead with it, to find out, too late, that they have to repay the money.

 

[gemini]

Thank you very much to everyone that has replied to my post! I have read through the fact sheet and will give the Alzheimers society helpline a ring. However to clarify a point, the consultant was merely suggesting that WE look into the POSSIBILITY of releasing equity. He was in no way offering advice on the subject.

Many Thanks
Gemini

 

[Nebiroth]

ANything like this needs to be done with extreme care. The Local Authority will look into someone's financial background, particularly if they appear to not be self-funding. Deliberately giving away money or assets, or suddenly spending large amounts, could be regarded as a "Deprivaton of Assets", meaning it has been done to avoid paying care fees. There is no time limit on this and such actions can still be regarded as a "Deprivation" even if the person was fit and well at the time it was done.

For example, giving away property, savings, etc are all likely to be regarded with suspiscion.

Frankly, I think a consultant should stick to advising about medical matters. A doctor does not necessarily know anything about the system of care fees etc and (again in my opinion) appears to be offering bad advice.

 

[Margaret W]

Gemini

Consult Help the Aged, they give free advice, far better than mine below, which should not be relied on.

An equity release scheme means, in effect, that you borrow money with the security of the house. The amount you can borrow varies from scheme to scheme, so check this out. As far as I am aware most schemes at the current time are not very good value.

I don't think the legislation regarding deprivation of assets applies to an equity release scheme.

As a result of invoking an equity release scheme, the owner of the property will receive an annual sum of money. This will be taxed under normal taxation rules.

As your mum owns her own home, she will be liable to pay care home fees. However, if she does not sell her home any fees paid by the local authority will be counted as a debt against the home when it is eventually sold.

If she takes out an equity release scheme, it will give her more income, and hence might mean she is no longer entitled to pension credit.

It is a minefield - ask for help.

Regards

Margaret

 

[Norman]

Margaret W As a result of invoking an equity release scheme, the owner of the property will receive an annual sum of money. This will be taxed under normal taxation rules.

Gemini
Or a lump sum.
the only only advice I can add is to consult an independent financial advisor.
Do not accept the FA connected with the equity release firm,they can only advise on their own product.
Norman