Legal advice for Deferred Payment Agreements
Written by Hilary Cragg | Care Support Team | 12 November 2024
When it comes to funding long-term care, Deferred Payment Agreements (DPAs) can be a practical solution for many families. These agreements, available through local authorities, allow individuals to defer their care home fees by securing them against their property, usually the family home. While DPAs can be helpful, they come with complexities that families need to understand before making a commitment. Here, Hilary Cragg, Solicitor and Partner at Nash & Co Solicitors, shares expert advice on avoiding common pitfalls with DPAs and provides guidance to help families make informed decisions.
1. Understand the full costs involved
DPAs can appear straightforward at first, but there are often hidden costs that families should consider before entering into such an agreement. Besides the care fees themselves, families must be aware of additional charges, including interest and administrative fees. Many DPAs are not interest-free; local authorities typically charge interest on the deferred amount, which accrues over time and can significantly increase the total amount owed.
“Interest rates on DPAs vary by local authority and are often adjusted annually,” Hilary Cragg explains. “This means that a DPA can end up costing families more than they anticipated, particularly if they aren’t prepared for future rate increases.” Families should also consider any administrative fees that may apply. These fees can cover tasks such as setting up the agreement, maintaining the account, and processing repayments.
Another factor to keep in mind is inflation, which may indirectly affect the total cost. As care home fees rise annually, the amount deferred through a DPA will increase accordingly, potentially increasing the final debt amount. Some agreements include additional fees for monitoring or updating the DPA each year.
Key tip: Before committing to a DPA, families should ask the local authority for a detailed breakdown of all associated costs. This breakdown should cover initial setup fees, ongoing administrative costs, and the applicable interest rate, as well as any provisions for changes over time. By fully understanding these costs, families can avoid unpleasant surprises and prepare financially for the future.
2. Assess the impact on the family home
Using the family home as collateral is one of the core aspects of a DPA, and it’s crucial to understand how this can affect ownership, future use, and inheritance planning. When families enter into a DPA, the local authority places a legal charge on the property, which means that the home essentially serves as security for the loan. For families with co-owners or other beneficiaries tied to the property, this arrangement can be complex.
Case study: Navigating property ownership and Deferred Payment Agreements
Recently, Hilary worked with a client who owned only 50% of her property, with the remaining half held in a life interest trust for her former partner’s children. Although she qualified for a DPA, the Integrated Care Board (ICB) had not accounted for this trust arrangement or the property’s co-ownership status when preparing the agreement paperwork. Without understanding the nuances of her ownership, her DPA could have been mismanaged, potentially delaying or complicating the agreement.
“When a property has multiple owners or is held in trust, these factors must be clearly communicated to the local authority,” Hilary explains. “For my client, I was able to guide her on the additional documentation needed to ensure the ICB understood the shared ownership and trust structure, enabling a smooth application process.”
For families where multiple individuals have an interest in the property—whether through co-ownership, trust arrangements, or inheritance planning—clarifying these details with the local authority is essential. The DPA terms should reflect any co-ownership arrangement, and specific arrangements may be necessary to ensure that other owners’ rights are respected. It may also mean that the DPA is not possible and that the local authority will be required to part fund the cost of care.
Key tip: Families should carefully review the ownership structure of their property before applying for a DPA. Any trusts, co-owners, or other interests in the property should be disclosed in full to avoid complications. Working with an experienced solicitor can help ensure that all relevant documentation is provided to the local authority, reducing the risk of delays or misunderstandings.
3. Pay attention to repayment terms
One of the most critical aspects of a DPA is the repayment requirement. Typically, the deferred amount must be repaid either during the homeowner’s lifetime if they decide to sell the property or upon their death. However, DPAs can vary significantly in their repayment terms, with some offering flexible options and others imposing strict deadlines or even penalties.
“Each local authority may have its own unique set of terms when it comes to DPA repayments,” says Hilary. “In some cases, families are given a generous timeframe to settle the outstanding balance, while others may require payment within a few months of the homeowner’s death. Knowing these terms in advance can make all the difference in planning for the future.”
For instance, some DPAs allow for early repayment without penalty, which could be beneficial for families who come into funds or decide to sell the property while the homeowner is still alive. However, other agreements may enforce strict repayment windows, which could be challenging for families who need more time to settle the estate or arrange financing.
Beware: Inflexible repayment terms
Hilary shares an example where someone’s DPA, required repayment within six months of the homeowner’s death. The family was unaware of this deadline and struggled to gather the necessary funds quickly. Such situations can create financial pressure during an already difficult time. Understanding repayment terms and any associated timelines can help families avoid this type of unexpected stress.
Key tip: When considering a DPA, families should review all repayment terms closely, including options for early repayment and any penalties. Knowing these conditions ahead of time allows families to make necessary financial arrangements in advance, avoiding unnecessary stress during what may already be a sensitive period.
4. Know your rights and protections
Deferred Payment Agreements are complex financial arrangements, and it’s essential for families to understand their rights and protections within these agreements. DPAs are governed by legal regulations to some extent, and families should be aware of the safeguards in place to protect their interests.
Hilary insists that families need to understand the level of consumer protection available with DPAs, which may vary depending on the local authority. “DPAs can sometimes lead to disputes, especially over fees or repayment terms. Knowing where to turn for support is essential if families encounter issues or misunderstandings during the process.”
Families should familiarise themselves with the rights they hold under consumer protection laws, particularly regarding notice requirements, fee transparency, and recourse options if disputes arise. Some DPAs, for instance, require local authorities to provide detailed statements and periodic updates on interest and fees. Families have the right to request information on these details, and if they encounter issues, they can consult a solicitor specialising in elder care or consumer protection.
Key tip: Before signing a DPA, ensure you’re aware of your rights. Seek legal advice from an experienced solicitor who deals with these situations and elderly clients. If you have concerns about the terms or if you encounter any disagreements, the solicitor should be able to help.
5. Prepare for potential impacts on inheritance
The impact of a DPA on inheritance is a critical consideration, particularly for families concerned about passing assets to future generations. Because DPAs are typically repaid from the estate, they can reduce the total value left for beneficiaries. This can be particularly impactful if the family home is the primary asset, as its sale may be necessary to cover the outstanding debt.
Consider inheritance tax implications: When a DPA is repaid from an estate, this can affect the estate’s total value and, in some cases, reduce potential inheritance tax liability. However, it’s essential to understand how this might affect the portion left to beneficiaries, especially if the DPA takes priority over other assets.
Key tip: We’d encourage families to consult with a financial planner or a solicitor experienced with estate planning strategies. This way, intended inheritance could be better preserved. Options might include setting aside other liquid assets for repayment or arranging life insurance policies to cover the DPA amount, which can allow the family home to remain within the family.
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6. Avoid misunderstandings with clear communication
Clear communication with the local authority or care provider is key to ensuring a smooth process with DPAs. Families should ensure that all relevant information—such as property ownership details, financial information, and eligibility requirements—is accurately shared and documented.
Hilary emphasises the importance of transparency in all communications related to DPAs. “DPAs can be intricate agreements, so having everything in writing and reviewed by a legal expert is crucial. This helps avoid misunderstandings and ensures that families are fully aware of all the terms and conditions.”
A solicitor who specialises in elder care law can be invaluable in this process. They can help families clarify DPA terms, review the agreement for any ambiguous clauses, and provide guidance on disclosing necessary information. This is especially important when families have unique circumstances, such as joint property ownership, trust arrangements, or specific estate planning needs.
Key tip: Before submitting any documentation to the local authority, consider working with a solicitor to review the paperwork. This step can help ensure that the DPA process moves forward smoothly and reduces the risk of issues arising from missing or misunderstood information.
7. Nash & Co Solicitors and Hilary Cragg are here to help
Navigating Deferred Payment Agreements can be daunting, particularly when complex ownership, inheritance, or financial arrangements are involved. Nash & Co Solicitors is committed to supporting families through this process, with in-depth expertise in elder law, estate planning, and long-term care funding. At the heart of our DPA services is Hilary Cragg, Solicitor and Partner, who has extensive experience in helping clients understand the nuances of DPAs and guiding them through the application process.
Hilary is able to help you no matter where you are in the England. By using Teams and other video and communication software, she’s able to help clients across the country.
Her approach is both knowledgeable and compassionate. She has worked with families in diverse circumstances, understanding that every client’s needs and concerns are unique. For Hilary, it’s not just about clarifying the legalities of DPAs, but about providing reassurance, options, and peace of mind for those considering this type of agreement.
“I want to help clients get this right,” Hilary explains. “These are important documents; too important to leave them to chance. Many clients come to us feeling overwhelmed by the paperwork and the intricacies of DPAs. My goal is to simplify the process, answer all questions with clarity, and empower families to make informed choices that protect their best interests.”
How Hilary Cragg can assist you with Deferred Payment Agreements
Hilary can provide specific, tailored advice based on each client’s individual situation. This includes:
Clarifying Ownership Complexities: For clients who co-own properties or have trust arrangements, Hilary’s expertise ensures these details are properly communicated to the local authority, helping to avoid misunderstandings and delays.
Explaining Financial Implications: Hilary provides a clear breakdown of the financial obligations associated with DPAs, so that families are fully prepared.
Ensuring Legal Compliance and Protection: With a deep understanding of elder care law, Hilary reviews each DPA carefully to ensure that her clients’ rights are protected and that all terms are fully transparent.
Guiding Through the Application Process: Hilary can assist with completing and submitting the necessary documentation, providing detailed guidance on what is required to ensure a smooth application.
For many families, having a trusted legal advisor like Hilary on hand means they can navigate the process confidently, knowing they have a dedicated advocate who understands both the legal landscape and the emotional challenges that can come with long-term care decisions.
Key Tip: If you’re considering a Deferred Payment Agreement or are simply exploring your options, we encourage you to reach out to Hilary Cragg at Nash & Co Solicitors. A conversation with Hilary can help clarify your choices and provide valuable insights into the best path forward for you and your family. Hilary is always here to offer guidance and to support you in making well-informed, beneficial decisions.
This commitment to client care is what sets Nash & Co Solicitors apart. By working with Hilary and our team, families can find the clarity and reassurance they need when dealing with the complex requirements of Deferred Payment Agreements.
Resources for further support
For families considering or navigating Deferred Payment Agreements, these resources provide valuable guidance and support:
Plymouth City Council – Information, guidelines, criteria and application forms for Deferred Payment Agreements
Cornwall County Council – Information, guidelines, criteria and application forms for Deferred Payment Agreements
Devon County Council – Information, guidelines, criteria and application forms for Deferred Payment Agreements
No matter where you are in the UK, we can help you. Please get in touch and we can tailor our advice to wherever you currently live.
Summary
Deferred Payment Agreements can offer essential financial relief for families covering long-term care costs, but they require careful consideration and planning. By understanding the potential pitfalls and consulting legal experts like Hilary, families can make informed decisions and secure a smoother process.
Hilary sums up her advice: “A DPA can be a valuable tool if handled correctly. The more prepared you are, the better positioned you’ll be to avoid surprises and make decisions that align with your family’s goals. Don’t hesitate to seek professional advice if you have questions about the terms or process.”
Taking these proactive steps can help families navigate the complexities of DPAs with confidence, ensuring that their financial and legal interests are protected along the way.
and potential drawbacks. By understanding the differences in costs, flexibility, and risks, families can make a decision that aligns with their unique financial circumstances and future goals.
If you’d like more guidance on DPAs or help with applications, we encourage you to reach out to Hilary Cragg by email at hcragg@nash.co.uk or you can call her on 01752 827047. Hilary provides personalised advice and support to help you navigate this complex decision with confidence.
