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Later Life Planning, a Series – Property rich cash poor - news article image

Later Life Planning, a Series – Property rich cash poor

8 Sep 2021

2 minute read

As an adviser working in the Later Life Financial Planning arena, I encounter many different scenarios and client circumstances.

In this series I would like to share a few examples of situations I have seen and dealt with that may help you avoid some of the common, and sometimes less common, pitfalls I have seen.

There are many people in Oxford and the West End of London (where our two offices are) who are property rich and live off their rental income during normal times.

However, if/when such people go into care their expenditure increases significantly and they can find they have to start spending their savings.

Recently I encountered a situation where a client’s savings/investments were predominantly tied up in a property portfolio and they ended up running out of cash to pay for their care. Luckily, this occurred when there was a reasonably buoyant property market and it just so happened that one of their rental properties was vacant at the time, consequently they were able to buy some time and release money from their portfolio pretty quickly. They were lucky on this occasion – however had this happened when the property market was in the doldrums and/or their properties were all fully let they could have been forced to leave the care home they were in. 

Even though your assets are tied up in rental properties you are still considered a “self-funder” by the local authority if your assets exceed the £23,250 capital limit for assistance. Soon to become £100,000, as announced in the recent paper on Health & Social Care, a controversial subject I shall be expanding on in a separate piece very soon. 

The moral of the story here is to think about the prospect of paying for care in advance by figuring out how much care fees might cost you over and above your pension income (the “care fees gap” as I like to call it) and then calculate how long your liquid capital will last. If the answer is that your capital will last less than five years and you have a rental property/properties or land, then you should start to sell up in good time to top-up your liquidity. 

There is no substitute for planning and taking sound planning advice, and thinking ahead.

Later Life Planning, a Series – Property rich cash poor - news article image


Tim Davison

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