Funding for long term care can be a very complex subject, there are many ways these fees can be met and deciding the right option can be hard.
Within this blog I look at the Deferred Payment Agreement (DPA), which in summary, is a type of Equity Release scheme that can be offered by the local authority. This enables individuals who are self funders to use their home to fund the care they have to pay for.
There are certain conditions that have to be met in order for an individual to qualify, these include:
- They permanently live in a care home (or are about to).
- They do not have enough assets, other than the value of their home, to meet the cost of the care home fees.
- They do not wish to sell their home or can’t see it happening quickly enough to pay for their care home fees.
The benefits of using a DPA is that generally the interest rate is low (although research should be conducted at the time to check this) and it gives more flexibility to allow the property to be sold at the time of choosing if applicable. In addition, the individual may benefit from any increase in value of their ‘home’ and have the option to rent out the property if they desire.
Whilst, as highlighted, there are benefits to using this option there are some potential drawbacks. The agreement is open ended which means the debt will grow, this may result in the property having to be sold to repay the debt. It may also impact other benefits the individual is entitled to.
When taking out a DPA the individual will be asked to sign an agreement which will mean they agree to pay the money owed, any added interest and any annual administration charges.
A DPA is not a ‘product’, the local authority has to offer this and if you are interested they will provide information if requested.
Whilst a DPA is not something Wingate can advise on, it is part of the wider discussion around care fee planning. As a specialist within this area, I am able to help clients plan for their later life and discuss options around how any care fees are paid. Using our sophisticated cashflow planning software, I am able to model various different scenarios to help demonstrate the affordability of the various options available.
If you or a friend/family member is in need of care and you want to look at the different ways care fees could be met, please contact me for an initial ‘free of charge’ discussion.