Equity Release and Long Term Care in 2025: What to Consider
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Key Takeaways...
- Equity release can be used to fund long term care by unlocking the value of your home while you still live in it, providing a lump sum or regular income.
- The key benefits include releasing tax-free cash from your property value, but there are risks such as reducing inheritances and affecting benefits.
- Costs largely depend on personal circumstances, such as your age, the value of your home, and your long-term health prognosis.
- Alternatives can include pensions, savings, investments, long-term care insurance, and government assistance, depending on your financial situation and eligibility.
Are you worried about what will happen to your equity release plan if you need to go into long-term care?
Equity release plans are becoming more and more popular as people over the age of 55 are looking for ways to fund their retirement.
As life expectancy increases, so does the chance of needing long-term care.
In This Article, You Will Discover:
Therefore...
What Type of Equity Release Plan Do You Have?
What happens to your equity release scheme in long-term care1 depends on the type of equity release plan you have:
Individual (or Single) Plans
Individual plans are usually set up by a person who is on their own or has no partner.
They are designed to provide for the individual throughout retirement.
If you choose in-home care, you can remain in your house and your plan will continue.
You can even use your equity released to fund this care.
However, if you do move into a care facility, your plan will then come to an end.
The loan is then repaid through the sale of your house.
If your family wishes to, they can settle the plan and use alternative cash to pay back the loan, plus interest.
Joint Plans
Joint plans are set up by co-habiting people.
The plan will remain in place until both parties have passed away or have moved into long-term care.
What is the Process?
Your adviser will then notify you about what paperwork is required and the process of settling your outstanding loan, plus the interest.
Will I Leave My Family in Debt?
One of the biggest concerns for many people considering an equity release plan is if they will leave their families in debt.
If you go into long-term care and need to be provided with assistance, there is no requirement that your children provide this.
It will come from public funds - so you will not risk leaving them with any financial problems should anything happen.
In addition, the great news about equity release is that the Equity Release Council2 ensures a 'no negative equity guarantee'.3
This means that your family will never owe more than the sale value of your home, even if the amount owed is greater, or property prices have dropped materially.
Does My Family Need to Sell My Home to Cover the Debt?
In general, yes, your family will need to sell your home to cover your equity release debt.
Equity release is usually repaid through the sale of your home when you pass away or move into permanent care.
As previously mentioned, in some cases, equity release can be paid off using alternative funds, should they wish to retain ownership of your home.
Speak to your financial adviser to learn more.
Equity Release Plans Can Help With Long-Term Care Costs
Whether you have an individual plan or a joint agreement, equity release could help.
If someone goes into long-term care, then releasing equity can help cover some of the costs involved in going to a more upmarket facility.
In addition, you can even use the funds you have released to access at-home care.
The benefit of this is that you will not be required to go to a care facility.
So, What Happens to Your Equity Release Plan if You Go Into Long-Term Care?
Your equity release plan will come to an end when the last homeowner goes into long-term care.
However, if you select to have long-term care from the comfort of your home, like a nurse or a family member moving in, then the plan will continue.
Be sure to ask your financial adviser about the terms of your plan to determine whether others may live with you.
If you move to a care facility or residence, then your plan will come to an end, in line with equity release regulations.
Common Questions
What Are the Risks and Benefits of Using Equity Release for Long Term Care?
What Is the Relationship Between Equity Release and Long Term Care?
How Can Equity Release Help Fund Long Term Care?
Is Equity Release a Good Option for Long Term Care Costs?
What Are the Alternatives to Equity Release for Financing Long Term Care?
In Conclusion
Equity release is a good option in that it allows you to potentially live a more comfortable retirement before moving into permanent care.
As long as your are aware of how equity release can impact your means-tested benefits, you can unlock cash with confidence.
Finally, make sure that you obtain the right equity release advice before considering taking out a plan.
It is important to fully understand what happens to your equity release plan if you go into long-term care, to see if it is right for you!