Care home fees - keep house or sell house?

[ohreallyohreallyoh]

I am acting as Attorney for my mum who has dementia. She has cash assets of approx £200k (some of which is currently tied) and a house worth, at best, £120-150k. Care home fees around £26k per year of which I need to plug as much shortfall as possible - around £12k.

House will rent for around £6k per annum, assuming it is let for 10 months a year and it needs no more than £1k in maintenance. It will make a loss for the first 12 months rental as it is stuck in the 70s and needs some work. I guess some tax may need to be paid on profit.

Initial, hurried meeting with an advisor was to sell house as cash will give me more return than renting it. I feel uncomfortable with that (although didn’t challenge at the time cos we were so short on time) and was always led to believe property is about as good as it gets. Anything not spent on care home fees will be inherited half by me and half by my children and I am aware that my mum’s property maybe a good place for me to retire to both from a location and overheads point of view. Family home, sentimental value aside, I also want to do my best by my mum with the money she worked so hard for.

I am anticipating a long haul. My mum is early 80s and had siblings who went into their 90s. She is physically well although her dementia is vascular so a stroke is always a possibility. I think planning for a minimum of 10years of fees is prudent.

Any thoughts before I see the advisor again properly? Or can anyone direct me to good, simply explained investment advice basics?

I’ve recently been told that you can purchase an annuity for care home fees...this is not something I know much about at all and when I asked the person they linked me to this company
eldercaregroup.co.uk/care-costs/
I am sure there are other places you can ask (Money Saving Expert?) but thought I’d mention it in case it would help (if you purchased the annuity from the cash funds)

Bumpety bump...

Have you checked if your mother would be entitled to continuing care from the nhs?
The Alzheimer’s Society has a helpline and they can tell you all the possible grants and benefits your mother may be eligible for.
Dementia care is very expensive and sadly not always the highest quality my family have found.

Do you have medical/health power of attorney? When MIL went into a care home this was the only way we could get a quote for a bond which effectively is an insurance policy which would cover all care home costs upfront. A back of the envelope quote without a full medical was about c.£200k to cover all care home fees regardless of longevity.
Not wishing to be morbid - MIL had vascular dementia and lived for 4 years in a care home before passing away (as did my grandmother) - fees were £4k per month. Other friends with relatives with Alzheimer's really only managed 12-18 months.
As the elderly get increasingly frail, infections are more likely to be a risk.

One thing to consider before taking the Advisors advice
If you sell the house presumably he/she will invest the proceeds for you and earn commission on that
They won’t benefit from you keeping the property and renting it out
I’m not saying selling it is the wrong thing to do but worth bearing in mind

If she has 200k in cash, you’ve got a buffer before needing to sell the house. If there is sentimental value in the house can you exhaust the cash reserves first?

I hate to say this but ten years in a home with dementia is unlikely. I think average life expectancy in a NH is about two years. I'd use the cash first.

How long are you off from retiring possibly to her home? Would you think about selling your house and buying hers? Then you could do it up while living in it. Alternatively keep yours move into your mums and rent out yours?

Also bear in mind that if she does live a long time, I think you could be forced to sell her home to fund the care Home fees? But I may be wrong on that

Yes, I realise I have a buffer and I know long term we would be forced to sell. My query really is about making the best return on what we have short-medium-long term and whether, say £300k invested would give me a better than a £6k return annually cos that’s my shortfall and I think that’s what I’d make renting the house out.

The average life expectancy with dementia at this point is 4.4 years. I am looking long term because she is in seriously rude physical health and her genes would suggest a life beyond 90. The prospect is quite terrifying but if I ignore it and pretend it won’t happen....She is also only currently in a care home and does not need a nursing home by any stretch of the imagination. She just needs prompting with the basics of routine and not to be allowed out on her own ‘cos she has no idea where she is anymore. This is why I say long term....

Where it’s hard is the unknowns of the stock market - for your £150k (plus I guess what you’d need to spend to refurb) to be making more than 6k per annum you’d have to make over 4% returns which isn’t outrageous. But the problem is you’re investing over a relatively short timeframe and you don’t know what might happen in terms of crashes or corrections. Over the last year I have some funds that have made me 18% and others that are currently down by 7%. If I’d only picked the 18% ones i’d be laughing but I could have easily picked the loss-making ones. If you’re going to invest the £200k, I’d have thought the rental might provide you with some diversification but it depends what your total costs would be for refurb+ any damage/void periods etc.

It would be worth double checking the rules on local authorIty responsibility if funds are depleted.

I’m very sorry you have to be thinking about all of this. It is such a hard thing to see loved ones declining and trying to manage the practical side as well as the emotional.

I would sell the property and invest the money. Sounds like the house would need money spent on it to make it rentable and you need to factor in all the costs of maintenance, insurance, boiler checks and all the bits that landlords are responsible for + taxes to pay etc. It can also be quite stressful and you're risking having to fork out for big-ticket items at short notice.

I think it's much easier to cash it in a pick a range of funds to invest the money. If it's in the ISA wrapper, any money made won't even get taxed.

So if you need £12K per year (minimum) over 10 years, and have £200K in cash to play with, then I would certainly be using the cash first, and then thinking about the house in 7-8 years time.

If the house makes a loss in the first year (due to upgrades), and then returns £6K per year, then your shortfall/investment/payments are:

Yr 1: £18K (£6K upgrades to house, £12K care home fees)
Yr 2: £6K (£12K care home fees - £6K rental return)
Yr 3: £6K
Yr 4: £6K
Yr 5: £6K
Yr 6: £6K
Yr 7: £6K
Yr 8: £6K
TOTAL = £60K

*Assuming rental return goes up proportionate with care home costs, which of course cannot be guaranteed and probably care home fees might rise more than rental returns.

You are on the fence about retiring possibly to this property, so if I were you I would not sell it now for the extra £100K in cash to invest. If you already have £200K in cash invested, which will deplete at the above rate, I wouldn't be selling right now, especially with the markets perhaps uncertain and going into a flat phase with Brexit around the corner.

The care home fees may increase...all the homes near my mum charge around £1000-£1200 per WEEK. These are not ‘posh’. That is for dementia. Nursing care is extra

Isn’t the 6k gross rent coming in? After expenses and taxes, you’d be lucky to put 3k towards the home fees (but obv needs a proper calculation).

I have been on a similar journey. DM has had dementia for a decade, all through her 80s. Her physical health is still good, so she may live another decade...or die tomorrow She has property which I rent out.

I was lucky in that she is still living in sheltered housing, with a career coming in. This is FAR cheaper than a home, and offers her more independence and a better quality of life.

FWIW I don’t fully understand previous posts. I doubt your DM will pay much tax, if any, on such a low income and it is very possible for an otherwise healthy person with dementia to live a long time. You plan for the worst, rather than assume your DM is ‘average’.

Two early considerations:

1. How happy are you about dealing with tenants, broken boilers etc. You usually get a better return on renting property as being a landlord is a faff.
2. What would happen to your DM when the money runs out. A less nice home?

My preference would be to defer decisions for as long as possible. So start as a landlord and then sell if it becomes too much. One advantage for me was that I had to update the flat (take out the turquoise carpet in the bathroom - though overall I simply caught up with maintenance and left it looking clean so not a large expanse) so with tenants it looks better than it did as an old lady flat, and will sell more easily.

Career, not career!

Also make sure she is getting Attendence Allowance.

200k invested 8k return
Rent the house 6k

I can't see the issue if you need 12k

I can name funds that have yielded >4% with principle protection for over 15 years. Was the IFA any good

Has she been assessed for "NHS continuing care" recently? If not she should have been. If not request (insist) on a checklist assessment to see if she checks in and then go from there.

I second checking whether mum qualifies for CHC. The OP seems to have disappeared, she probably has a lot on her plate.

If I were in your shoes I would be inclined to hold on to the property and not make any rushed decisions. With £200k of cash reserves it may also be prudent to spend say 10-15% of this on modernising the property (I’m talking wiring, boilers etc - the unsexy stuff!) and perhaps neutralising the dated decor and putting in a straightforward but modern kitchen and bathroom (if these are very dated).

You are then left with more options for the property in the medium term - sell, rent, or retain within the family.

In say two years time, your mother will still have ample cash reserves and you are likely to be in a better place to assess how much longer she will be with you for. Dementia is a horrible illness and deteriorations can be unpredictable so my thoughts are with you and I very much hope she is receiving the care she needs at the home.

All the best.

I’m baffled by those saying OP should investigate continuing care. OP has said that her mother is in good health other than dementia - there is absolutely no way she would qualify for continuing care. The Alzheimer’s Society forum is full of posters whose relatives not only have dementia but additional complex medical needs and who still have been deemed ineligible for continuing care.

On the other hand, OP, I’m presuming that your mum already receives Attendance Allowance which, if she is completely self-funding, she will continue to receive even though she is in a care home.

Based upon the op's initial post you have no way of knowing whether her mum might be eligible for NHS continuing care. If she is being assessed for funding, there really isn't any harm in requesting an assessment and going from there.

Obviously no harm in requesting an assessment, although I know only too well that even when your relative is in a care home, looking after their welfare and affairs is still massively time-consuming and following it up may not be the OP’s first priority.

I have read the full thread. In OP’s second post she states that her mother is in “seriously rude physical health” and “just needs prompting with the basics of routine” - doesn’t exactly fit with the picture of someone who will qualify for continuing healthcare. Sadly (and unfairly in many cases) even severe dementia does not of itself qualify you for funding, so the OP is wise to look to maximise her mum’s income.