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We own two properties but live in a rented house. Would that affect care funding?

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Q We own two properties and have about £250,000 in equity spread across both. We rent out both properties and they are in a different part of the UK from where we live. We rent the house that we live in and have been here for 15 years.

I know this is not a tax-efficient way of living but we are happy to pay tax on our rental income each year, and we absolutely love where we live, not least because the rent is cheap. If possible, we would like to continue living here for the rest of our lives. However, once we retire we will rely on our property income to help pay our own rent.

I am concerned about what would happen if one of us needed to go into residential care. As we don’t live in our owned properties, would the remaining person have to sell the houses to fund care, and therefore lose income and not be able to pay our own rent?

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A You are right in thinking that because neither of the properties you own is your home you wouldn’t get the benefit of having the value of these properties disregarded in the financial assessment done by the local authority to work out how much you need to contribute to care home costs. The disregard applies when the partner of someone going into care carries on living in the joint home.

If one of you does end up going into care, you would be expected to pay the full amount of the care home fees because the capital you have that is taken into account in the financial assessment is way over the £23,250 limit for not having to meet care costs in full (also known as self-funding). You won’t be forced to sell either of your properties but unless you have other resources available to pay the fees, selling up may be your only option.

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It did occur to me that one way round potentially not being able to pay the rent on your home would be to persuade your landlord to sell you the home you are living in – you could maybe sell one of the rental properties and live in it mortgage and rent free. But that assumes that your landlord would be amenable and that the sale proceeds from your rental property would be enough to buy the home you are currently renting.

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