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Dementia Live-in Care: How Do I Pay for It?

If your loved one is living with dementia, it can be difficult to work out how to pay for the dementia care they need. Enabling them to remain in their own home with 24/7 support from a live-in carer is the ideal situation and there are various ways this can be arranged.

Local Authority Funding

The social services department of your loved one’s local authority will carry out a free needs assessment, and if this identifies that they require elderly care or dementia care, you can ask for a means assessment. If your relative’s assets total less than £23,250, they will be entitled to support from their local authority. They can request this in the form of a direct payment to use towards their chosen dementia care provision.

People often miss out on the financial support to which they are entitled because they do not know their rights. A private care provider will be able to advise you on what help your loved one should receive and help you to claim benefits such as attendance allowance on their behalf.

Savings, Pensions or Loans

If your loved one needs to pay for their care privately, they may be able to use their savings or a pension to fund Alzheimer’s care in their own home. If more money is needed you may wish to take out a loan from a building society or bank. In the short term, this may be useful so that your loved one can continue to live independently in their own environment while you consider other longer-term options for funding.

Equity Release

Using your loved one’s property to release some equity to pay for their private live-in care is a popular solution. The care recipient can continue to live in their home and access some of its value at the same time. This is a tax-free way of funding in-home care. There are two main methods of releasing the equity in your loved one’s home; reversion plans and lifetime mortgages.

A Reversion Plan

In this type of equity release, some or all of the property is sold to the reversion company. Your loved one would still be entitled to live in the home rent-free for as long as they need, and the company is recompensed when it is sold. This includes benefitting in any increase in the property’s value at that point.

The reversion company will usually pay between 30 and 60 percent of the property’s value, but this depends on factors such as your loved one’s health, sex and age. If they expect to have to wait a long time for a return on their investment, the offer will be lower.

Dulcie’s care story

Duclie is one of our longest serving customers. In this video her and her family talk through their decision to arrange care in the home rather than the care home.

A Lifetime Mortgage

A lifetime mortgage is a loan based on the property value. The mortgage is repaid when the owner of the property dies, and it is sold. However, the property owner’s beneficiaries will retain any surplus money should the property have increased in value when it is sold. Conversely, if the home’s value does not meet the amount that needs to be repaid to the mortgage company, beneficiaries would be liable to cover this unless they have arranged a no-negative equity guarantee. If this is in place then any outstanding balance owed on the mortgage is wiped.

The major advantages of lifetime mortgages are that the person’s family may still benefit from the sale of the property if it sells for more than the outstanding loan amount and that the equity released is tax-free.

It is always advisable to take professional advice before deciding which financial option is the best in your individual circumstances.

A Care Annuity

Dementia care or elderly care can be paid for by a care annuity, an insurance policy that provides a guaranteed income to fund care for the life of the individual. It is bought with a lump sum invested in the company.

A care annuity can also be called an ‘immediate care plan’, an ‘immediate need care fee payment plan’ or an ‘immediate needs annuity’. Care annuities can be index-linked providing protection against inflation. In some cases, it is possible to arrange capital protection so that if your loved one dies earlier than expected, some of the fees become repayable. Buying a care annuity also makes sense for people who want to lessen their exposure to inheritance tax, because it will reduce the amount their estate is worth.

It is not the ideal solution for everyone who wants to fund home care for their loved one and especially if the need for a live-in caregiver turns out to be temporary. Essentially a care annuity is a best-guess assessment of how long care will be needed, and as such, it is possible to lose money on it.

It is important to consult a financial adviser before making a decision about how to pay for dementia live-in care for your loved one.

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