Use your home to pay for frail care

Making arrangements to ensure you will be able to afford frail care should you need it in later years ranks right up there with regularly updating your will - that is, it is not something most people relish doing.

"But for many people, the start of a new financial year is the right time to think about and plan for the future," says Berry Everitt, MD of the Chas Everitt International property group.

"For one thing, laying plans to ensure that the costs of long-term professional care will be covered if you ever need it can relieve your children and other family members of a lot of personal and financial anxiety," he notes.

Writing in the Property Signposts newsletter, he observes that places in old age homes, and especially those with frail care facilities, are scarce and that waiting lists are usually long. "These openings usually also come with relatively high costs which can be a problem for retirees living on a fixed income.

"However, if it is managed properly, the home you own can be used as an asset to help pay for frail care."

Everitt says many people who own large properties believe that the right thing to do as they age is to sell and put a chunk of the proceeds from their homes into policies that will pay out a monthly amount if they need frail care. "But there is a problem with such arrangements, in that the sale of the house must realise a really hefty sum, and that the amount available for investment will be eroded if there is still a home loan to pay off."

A better option, he suggests, is to pay off the property as soon as possible and then, if it becomes necessary, to let it and use the monthly rental income to pay for frail-care. "And this situation will of course be even more favourable if you own more than one property."

A major advantage of this type of arrangement is that the property will still form part of your estate - although landlord issues, such as who will accept the rental payments, channel the money to the frail care centre, and see to maintenance of the property do need to be clarified ahead of time.

"In addition, owners should consult their attorneys and accountants or financial planners timeously to discuss matters such as ownership and inheritance, who would hold a power of attorney to make decisions should they fall ill, and how to take care of paperwork to reduce tax and legal liabilities - for their heirs as well as themselves."

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