4 If your relative owns their home
On this page we explain about:
1. When the value of a property won't be taken into consideration
2. Deferred payment agreement
3. 12-week property disregard
When the value of a property won't be taken into consideration
The most important difference between the financial assessment for residential care, and the financial assessment for care at home and other benefits, is that the value of your relative’s home will be taken into account when assessing their capital (Northern Ireland excepted).
As your relative will no longer need their home to live in, there is an assumption that this will be sold as soon as possible to fund care. There are some exceptions (see 12-week property disregard, below) but the most important things to know are:
- If your relative owns a property jointly with their partner who is still living there, the property will be disregarded (see ‘Property Disregard Agreement’ below).
- Your relative’s property will also be excluded from assessment if they have a close relative living in the home who is either incapacitated (they receive or would qualify for a disability benefit); a child they are responsible for under the age of 18; or aged 60 or over.
- The local authority has discretion to ignore the property in special circumstances, such as if it is the only home of your relative’s long-time carer.
In other words, a self-funder won't necessarily be in a position where they have to sell their home.
Deferred payment agreement or deferred payment scheme
If your relative doesn’t have enough money to pay their fees and is finding it difficult to sell their home, or doesn’t want to sell it straightaway, they can request a long-term loan known as a ‘deferred payment scheme’ or 'deferred payment agreement' (Northern Ireland excepted).
This means that the council will pay your relative’s residential care costs and secure the loan against your relative's property, until he or she passes away or the property is sold. At this point the loan will be repaid to the council. This will all be outlined in an agreement with the council, that will need to be signed by your relative.
Since 1 April 2015, changes in the Care Act mean that all councils in England are required to offer deferred payments to people who meet the following criteria:
- they are receiving long-term care in a care home or soon will be
- they are financially assessed as having less than £23,250 in savings, other than the value of their property
- they are a homeowner and there isn't anyone else living in the property, such as a spouse, partner, child or a relative aged over 60 years.
Paying interest on the deferred payment agreement
Local authorities are able to charge interest of up to 2.15% (1 January-30 June 2016) on the deferred payment together with an additional charge for legal costs and administering the payment from the start of the agreement.
Both the interest rate and charge are designed to cover the local authority’s costs in making the loan; they are not allowed to make a profit from the arrangement.
When the property is sold, the executor of the estate will be liable to repay the debt out of the estate, though they are not themselves personally liable.
Challenging a local authority decision
If you feel you have been unfairly denied a deferred payment, seek clarity from the local authority about the reasons for this, and you can make a formal complaint if necessary. For advice on how to go about this, see Challenging a local authority assessment.
In Wales, your relative can request a deferred payment if:
- their savings or other assets are less than £24,000
- they do not have other income which is able to meet the costs of their care
- they have a beneficial interest in the property
- there is no outstanding mortgage, or the outstanding mortgage will leave sufficient money to fund the cost of care.
Your relative's local council is not obliged to offer a deferred payment, but if it doesn't, they must give the reason in writing.
No interest is charged on the loan while your relative is alive, but if the loan is not repaid in full within 56 days of your relative's death, the next-of-kin will be charged interest at a rate that will be made clear when the payment is agreed.
The implementation of the Social Services and Wellbeing Act in Wales may result in changed to deferred payments from April 2016.
12-week property disregard
If your relative permanently moves into a local authority funded care home in England, Wales or Northern Ireland, has less than £23,250 in savings (£24,000 in Wales), low income and owns their own property, the council must ignore the value of the property for the first 12 weeks of their stay (2015-16).
However, if your relative sells their property before 12 weeks, the disregard ends. After 12 weeks, the value of their property will be counted as part of their capital.
If your relative owns a property with a partner, who still lives there, the property is disregarded until circumstances change. If the partner wants to move to a different property or also decides to move to a care home, your relative can use their share of the sale proceeds to help their partner buy another property or costs of care. If the partner dies, and the house is sold, your relative’s share of the property would then be taken into account as part of their assets. It is worth checking the local council’s procedures regarding this.
In Scotland, the rules are slightly different; the threshold for savings is £26,250 (2016-17), and although the property owner is entitled to the 12-week disregard unless the property is sold within that time, the disregard period can start from the decision that the stay in the care home is permanent (which may be longer than 12 weeks in some circumstances).