Deferred Payment Scheme

If the assessable assets that you own, excluding the value of your property, are less than the means test threshold and you do not wish to sell your home, your local authority may allow you to defer payment of your contribution. Your local authority is not obliged to do this, but if they do, they will pay agreed care costs in return for a legal charge on your property, and these care costs will be repaid when the property is sold.

This arrangement is similar to an interest-free loan for the period of the deferred payment agreement.

The scheme is for home owners moving permanently into residential care funded by the local authority, who either do not wish to sell their home or are unable to sell their home quickly enough to pay for their care.

For the first twelve weeks your property is disregarded. After this time you will need to agree to your local authority placing a legal charge on your property. In return, the local authority will pay the balance of care costs, up to an agreed amount, which would have been met from the sale of the property.

After this twelve week period you could also use the scheme to pay for more expensive accommodation depending on the net value of your property.

The local authority will wish the money to be repaid when the property has been sold, or when you terminate the agreement, or within 56 days of your death. After the end of the agreed period the local authority may start to charge interest.

The advantage of this facility is that the loan is interest free.

The disadvantages are: not all local authorities offer this facility; the value placed on your home may be lower than you feel it would have been if the home had been sold; the local authority may place a limit on the amount they are prepared to pay. Also, it will reduce your estate not just for the purposes of inheritance tax but in relation to the inheritance you will pass on to your chosen beneficiaries.

The options, advantages and disadvantages are complex. However, help is at hand: talk to Supportive Financial Planning, we are here to help.