Care home fees in the UK are expensive depending on the type of care required, whether residential, nursing, or dementia care. It is important to plan to understand how you will be paying for the care of a loved one.
This can include finding out about government benefits, considering private insurance to pay for lifelong care or selling a family home to fund it.
This article does not give financial, legal, or tax advice. It is best to consult with professionals before taking any action.
It is only natural that you are considering how to protect your assets from care home fees – and to pass on inheritance to your loved ones.
Why not sell your home now for cash, downsize and spend your equity as you wish long before you go into care?
Table of Contents
How can I avoid losing my house to pay for care?
If you intend to leave your home to your children, then the prospect of having to sell it to pay for care will be distressing. Before we go into more detail on how to avoid losing my home to pay for care, these are some important points to remember:
- It is illegal to avoid paying for care home fees or putting it into a Trust. This is known as deprivation of assets.
- There are legal options available to you that can help you protect your assets while paying for care.
If you give away your family home to avoid care fees, it is likely to be seen as a deliberate deprivation of assets. Your local authority will reclaim payment from you.
There are additional steps you can take – but it is important to do so well in advance before any care is needed.
You can transfer your property to a Trust with your children as trustees. However, with a transfer of ownership, your children can kick you out as it will be no longer your home.
According to the ONS 2021 survey, approximately 35% of homeowners are self-funding their care.
There must be other reasons for doing so apart from simply avoiding care home fees. It is best to speak to a Trust specialist who can give you financial and legal advice before doing so.
New Rules for Care Home Payments: What You Need to Know
The landscape of care home payments is shifting, with new rules set to reshape how we approach long-term care costs. These changes, while complex, aim to provide more clarity and protection for those facing the prospect of care home fees.
Let’s review the key aspects of these new rules for care home payments and what they mean for you and your loved ones.
Understanding the Care Cost Cap
At the heart of the new rules is the introduction of an £86,000 lifetime cap on personal care costs. This cap, set to be implemented in the future, marks a significant shift in how care costs are managed. It means that once an individual’s care costs reach this threshold, the state will step in to cover further care expenses.
However, it’s crucial to understand that this cap only applies to personal care costs, not accommodation or living expenses. This distinction is vital when budgeting for long-term care needs.
Means Testing: A Closer Look
The means testing threshold of £23,250 remains a key factor in determining eligibility for state support. But what does this actually mean in practice?
Assets considered in means testing include:
- Savings
- Investments
- Property (in most cases)
- Regular income
If your total assets exceed £23,250, you’ll likely be responsible for funding your own care initially. As your assets decrease, you may become eligible for partial or full state support.
Delayed Implementation: Planning Ahead
It’s worth noting that the implementation of these new care cost reforms has been pushed back to October 2025. This delay provides an opportunity for individuals and families to reassess their long-term care plans and make necessary adjustments.
Protecting Your Inheritance
One of the primary concerns for many is how care home fees might impact inheritance. While the new cap offers some protection, it’s still possible for a significant portion of assets to be used for care costs before reaching the threshold. Don’t forget 7 year rule.
Consider these strategies to protect your assets:
- Setting up trusts
- Gifting assets (with caution)
- Exploring long-term care insurance options
Understanding Deprivation of Assets
It’s tempting to consider giving away assets to reduce care costs, but beware: this could be viewed as a deliberate deprivation of assets. Local authorities are vigilant about this practice and may treat you as still owning the assets if they believe you’ve intentionally reduced your wealth to avoid care costs.
Examples of potential deprivation include:
- Transferring property ownership
- Selling assets for less than their true value
- Spending large sums on luxury items
Alternatives to Selling Your Home
While selling a property is often seen as the go-to solution for funding care, there are alternatives worth exploring:
- Deferred Payment Agreements: These allow you to delay selling your home, with care costs paid back from your estate after death.
- Equity Release: This can provide funds while allowing you to retain ownership of your property. But please watch out for equity release horror stories. We suggest that you downsize but don’t buy a retirement property as they become difficult to sell.
- Rental Income: Consider renting out your property to generate income for care costs.
Will I have to sell my house to pay for care?
No, you won’t necessarily have to sell your house to pay for care. Whether you need to sell depends on your financial situation and the local authority’s assessment. If your capital exceeds £23,250, you might be expected to cover your care costs yourself. However, there are scenarios where your home is not included in the financial assessment. For instance, the property might be disregarded if your spouse or a dependent relative lives there.
You could explore options like a deferred payment agreement, where the council pays your care fees and reclaims the money once your property is sold or after your death.
What happens to my home if I move into a care home?
If you move into a care home, your home might be included in the financial assessment to determine your contribution to care costs. However, it won’t be considered if certain relatives, such as a spouse or a dependent child, continue living there.
During the first 12 weeks of your stay in a care home, the value of your home is typically disregarded, giving you some breathing space to decide on your next steps. If you choose not to sell, renting out your home could provide an income to help cover care fees, though this comes with responsibilities and potential void periods.
Can I keep my home & still pay for care?
Yes, it is possible to keep your home and still pay for care. One option is to rent out your property to generate income, although this might not cover all care costs. Alternatively, a deferred payment agreement with your local council can allow you to keep your home while they cover your care fees, reclaiming the amount later. Equity release schemes, like a lifetime mortgage, can also provide funds for care without requiring you to sell your home immediately.
It’s wise to consult a financial adviser to explore these options fully and find the best solution for your circumstances.
Why You Might Need to Sell Your Home for Care Costs?
Deciding to sell your home to cover care costs can be one of the toughest choices you’ll ever face. Many people find themselves in this situation as the financial burden of long-term care becomes increasingly overwhelming. Let’s take a closer look at the financial pressures that might lead you to consider this option and the emotional and practical challenges that come with it.
Financial Pressures
As we age, the likelihood of needing additional care rises. Whether it’s due to a chronic illness, mobility issues, or simply the desire for a more supportive living environment, the costs associated with care can be staggering. In the UK, residential care can easily run into thousands of pounds each month. For many, these expenses can quickly deplete savings or pensions, making it difficult to maintain financial stability.
While the government does offer some financial assistance, it often comes with strict means-testing. This means that if you own a home, you may not qualify for help, leaving you with the difficult choice of selling your property to fund your care needs. It’s a harsh reality that many face, and it can feel incredibly unfair.
Emotional Challenges
Beyond the financial aspect, there’s a significant emotional toll. A home is so much more than just a building; it’s filled with memories, milestones, and a sense of belonging. For many, the thought of selling their family home can evoke feelings of loss and sadness. It’s not just about bricks and mortar; it’s about the life you’ve built there.
Family dynamics can add another layer of complexity. Children and relatives may have their own emotional attachments to the home, leading to difficult conversations and potential disagreements. It’s essential to have open discussions with loved ones to ensure everyone understands the reasons behind the decision and to navigate any feelings of guilt or sadness that may arise.
Practical Challenges
On the practical side, selling a home involves a lot of moving parts. From preparing the property for sale to dealing with estate agents and legal paperwork, the process can feel overwhelming, especially if you’re already managing health concerns. It’s a lot to handle when you’re also trying to focus on your wellbeing.
Finding a suitable new living arrangement is another hurdle. Whether you’re considering a care home or a smaller property, it’s important to think about what will best meet your needs. This transition requires careful planning, and it can be daunting to think about leaving a place that has been your sanctuary for so long.
What is the threshold for the means test in England?
The threshold for the means test in England is £23,250. If an individual’s assets, including their home, are above this threshold, they will be expected to contribute towards their care costs.
How can I avoid selling my house to pay for care?
When faced with the high costs of care, selling your home might seem like the only option. However, there are several alternatives worth considering that can help you maintain ownership while still covering care expenses. Here are some options to explore:
Adapting Your Current Home
Making modifications like installing stairlifts or ramps can allow you to stay in your current home longer while making it safer and more accessible.
Equity Release
Equity release allows you to access the value tied up in your home without having to sell it. This can be done through a lifetime mortgage or a home reversion plan. With a lifetime mortgage, you borrow money against the value of your home, which is repaid when the property is sold, either after you pass away or move into long-term care. A home reversion plan involves selling a portion of your home to a provider in exchange for a lump sum or regular payments while still allowing you to live there. It’s important to seek independent financial advice to understand the implications and ensure it’s the right choice for you. Watch out for compound interest, charges and exit fees!
Renting Out the Property
If you’re moving into a care facility but wish to retain ownership of your home, renting it out could be a viable option. The rental income can help cover care costs while allowing you to keep the property. This option requires careful consideration of the responsibilities involved in being a landlord, such as property maintenance and tenant management. You might want to engage a letting agent to handle these aspects, especially if you’re unable to do so yourself.
Government Assistance Programs
The UK government offers various forms of assistance to help with care costs, which might reduce or eliminate the need to sell your home. The means-tested support includes Attendance Allowance, Personal Independence Payment (PIP), and Carer’s Allowance, depending on your circumstances. Additionally, if your assets fall below a certain threshold, you may qualify for help with care home fees through your local council. It’s worth exploring these options to see if you qualify for any financial support.
Deferred Payment Agreements
Some local councils offer deferred payment agreements, which allow you to delay paying care home fees until your home is sold, either after your death or when you choose to sell it. This arrangement can provide peace of mind by ensuring that you don’t have to sell your home immediately to cover costs. However, it’s important to understand the terms, as interest may accrue on the deferred amount.
Alternatives to Selling Your Home for Care Fees: Downsizing
Downsizing is an attractive option for many looking to manage care costs without parting with their home entirely. It involves moving to a smaller, more manageable property, which can release equity and reduce living expenses. This approach can offer significant financial advantages, as selling a larger home and purchasing a smaller one can free up funds to cover care costs or enhance your retirement lifestyle. Plus, it often leads to lower utility bills and maintenance costs, easing financial pressures.
Beyond the financial benefits, a smaller home means less upkeep, which can be a welcome relief as physical capabilities change with age. Downsizing also offers the chance to move closer to family and friends or into a community with better amenities and social opportunities, enhancing your quality of life and providing a supportive environment as you age.
Timing is crucial when considering downsizing. Planning ahead is essential to account for moving costs, potential renovations, and the emotional impact of leaving a long-term home. With careful planning, you can ensure a smooth transition and make the most of the financial and lifestyle benefits downsizing offers.
What is a deferred payment agreement?
A deferred payment agreement is an arrangement where the local authority provides financial assistance for care costs. In return, the individual agrees to repay the costs from the sale of their house after their death.
This allows individuals to delay selling their house until after their death.
Comparison of Care Costs
This table compares residential care with home care:
Care Options | Daily Cost | Weekly Cost | Monthly Cost |
Residential Care | £40-60 | £280-420 | £1200-1800 |
Home Care | £20-30 | £140-210 | £600-£900 |
The actual costs may vary depending on individual circumstances and location.
Can I put my house in Trust to avoid care fees?
You absolutely can. It is recommended that you speak with a solicitor specialising in Trusts to ensure that your trust is valid and to avoid issues with deprivation of assets.
There are three types of Trusts including Protective Property Trusts, Life Interest Trusts, and Interest in Possession Trusts.
Prior planning is essential if you wish to legally avoid paying for care home fees. Part of your financial planning will require long term care insurance policy.
It is often too late if your health begins to decline, and you are looking at needing residential or in-home care. If you are facing ill health, the only option left is to sell your property for cash, releasing the equity tied up and downsize to a smaller property such as a bungalow.
Step-by-Step Guide to Selling Your Home for Care
Selling your home to cover care costs can be a daunting process, but understanding each step can make it more manageable. This guide will walk you through the key stages, from valuation to finding a buyer, and highlight the importance of legal considerations.
Valuation
The first step in selling your home for care costs is obtaining an accurate valuation. This will give you a clear idea of how much you can expect to receive from the sale, which is crucial for care fee planning. An accurate valuation is essential when considering care home funding options, as it helps you plan how much of the proceeds will go towards paying for care with the property sale.
Finding a Buyer
Once you have a valuation, the next step is finding a reliable buyer. This is where choosing a trustworthy company like Property Saviour can make a significant difference. They specialise in buying properties quickly and for cash, which can be especially beneficial if you need to move into a care home promptly. A reliable buyer ensures that the process is smooth and that you receive the agreed price without last-minute changes.
Legal Considerations
Selling a home involves several legal steps, so it’s important to engage a solicitor who can handle the paperwork and ensure everything is in order. This includes preparing contracts, managing the transfer of ownership, and dealing with any existing mortgages or charges on the property. It’s also wise to consult a financial adviser who specialises in care fee planning to ensure that the proceeds from the sale are used effectively, whether for immediate care costs or future care fee planning.
Alternatives to Consider
Before finalising the sale, consider alternatives like equity release for care fees or renting out the property. These options might provide the necessary funds while allowing you to retain ownership of your home. However, if selling is the best route, ensure you are fully informed and supported throughout the process.
Selling your home for care costs involves several important steps, from valuation to legal considerations. It’s crucial to choose a reliable buyer, like Property Saviour, to ensure a smooth transaction. By understanding each stage and seeking professional advice, you can make informed decisions that best suit your needs and circumstances.
Can I give away my money and assets to avoid care home fees?
You simply cannot give away money or assets to avoid care home fees however, under exceptional circumstances it is possible to transfer assets so that it is not considered as a deliberate act deprivation of assets. It is best to speak with a solicitor with Trust experience.
If your assets including property exceed £23,250 then you will not be able to protect them from care home fees. This threshold applies to local authorities in England. Similar thresholds applies if you are in Scotland, Wales, and Northern Ireland.
Even if you are offered council-funded care, it might not meet your specific preferences or needs.
How much can you keep before paying for care and what is the savings threshold for care home fees?
To protect your assets and avoid care fees, it is important to ensure that your savings are under these means-tested limits:
- England: £23,250
- Wales: £24,000 for home care or £50,000 for a care home
- Scotland: £28,000
- Northern Ireland: £23,250
If you have savings and assets above these thresholds, it is likely that you will have to pay for your care. If you share your home with a spouse or partner, then your individual circumstances will be considered by the local authority.
These thresholds include any savings. income, shares and pension. Your property will be counted as capital after 12 weeks if you move into a care home on a long-term basis, but not if your spouse or partner continues to live there. Once your savings fall below £14,250, only income is considered for means-testing purposes.
To make the most of your savings and ensure that they are sufficient to cover your care costs, it is advisable to seek financial advice. This can help you to make informed decisions about how to invest your savings and plan for your long-term care needs.
What approaches can I use to reduce the value of my capital & property?
People use various methods to lower their assets’ worth and avoid care home fees:
- Buying a care home insurance with life cover (check as exclusions may not protect you)
- Repaying debts
- Making legitimate life expenditures, like a family holiday
- Setting up a Trust
Remember, disposing or ‘hiding’ assets to avoid means-testing by the council is risky. Councils are getting better at spotting those trying to dodge care home fees. If they suspect asset disposal, those funds will be included in the means-test.
Gifting assets is an option, provided it’s done legitimately and with sound financial advice.
Reasons for gifting include:
- Avoiding family disputes
- Allowing the recipient to enjoy the gift while you’re alive
- Expressing gratitude for support
- Simplifying estate distribution after death
- Transferring property maintenance responsibility
- Preventing estate distribution delays upon death
But, gifting assets like property carries risks like bankruptcy, divorce, death, or financial troubles for the recipient. See can I sell my house for a £1 to my son/daughter?
It’s important to balance potential risks and benefits before deciding on asset gifting. Seek professional financial and legal advice to ensure you’re following council rules.
What counts towards deliberate deprivation of assets?
Deliberate deprivation of assets can involve more than just giving away your money and assets. It can also include any attempts to reduce your assets through certain actions such as:
- Gifting money to someone, whether within or outside of your family
- Transferring ownership of your home to a family member to exclude it from the financial assessment for care fees
- Displaying large and unusual spending patterns or making large purchases that are out of character
- Taking up a new hobby such as gambling with your money
- Buying items to ‘hide money’, such as jewellery or a car, that may not normally be considered in a financial assessment.
What type of trusts can I use to pass on my property?
There are several types of trusts that will enable you to pass on your property to your loved ones. These can include Life Interest Trusts, Interest in Possession Trusts, and Protective Property Trusts.
Life Interest Trusts allow you to nominate a beneficiary, such as yourself or a family member, who has the legal right to receive income from or use the property named in the Trust.
Interest in Possession Trusts are similar to Life Interest Trusts, as they entitle the beneficiary to receive any income produced by the Trust as soon as it is produced. Protective Property Trusts, also known as “Property Trust wills,” allow you to set aside a portion of your property to pass on to loved ones.
It is important to speak with a Trust specialist, such as a solicitor, to determine which type of Trust is best for your specific circumstances.
Who is responsible for the Trust?
The trustees’ role is to manage the Trust according to its terms and make decisions about the Trust’s assets. These individuals could be appointed by the person who sets up the trust or by the Trust’s beneficiaries.
Commonly, children or close family members are named trustees.
Anyone over 18 and capable of responsibly managing the Trust’s assets can serve as a trustee. Sometimes, people think a professional trustee, like a solicitor or accountant, should be appointed. However, such professionals can charge high fees, leaving beneficiaries with less inheritance.
Choosing trustees is crucial as they play a key role in managing and administering the Trust.
Is equity release an option I should consider if I need to pay for my care?
Equity release is a financial scheme for homeowners over 55 in the UK, allowing them to free up some of their property’s value while still living in it.
The released money can be used for care costs or any other needs.
However, equity release is a long-term commitment that doesn’t require repayments. But, the interest rates and charges can mount up quickly, potentially leaving you in negative equity when selling or significantly reducing your inheritance.
Also, bear in mind that equity release could affect your eligibility for means-tested benefits.
Unfortunately, there are too many horror stories with equity release that can have a devastating financial impact.
In our opinion, it maybe an easier option to sell and downsize to a small property or simply sell your property if you are ill.
How to not sell your property when going into care?
If you, your spouse/partner or certain others wish to remain in your home, selling to cover care costs isn’t necessary. You and any qualifying dependants have the right to stay indefinitely without being compelled to sell for care payment.
How can I stop my house from being sold if I go into care?
If you or your partner, or dependents (under 18), choose to stay in your home, there’s no need to sell it to fund care. You and any eligible dependants can continue living there without being obliged to sell to pay for care expenses.
Do I have to sell my mother’s house to pay for her care?
Typically, costs must be repaid within set timeframes, with added fees and interest. This may allow some to avoid selling their home initially or entirely. If you disagree with a local authority including a home in a care cost financial assessment, you can complain.
Can I put my house in trust to avoid care home fees?
It depends on your circumstances as the council may deem it as a deliberate deprivation of assets. Get a solicitor who specialises in Trusts to give you professional advice.
What happens if you are in a care home and run out of money?
If you run out of money then your local authority will conduct a means-tested assessment and is likely to fund your care.
What is the 7 year rule for care home fees?
Many individuals assume that the deprivation of assets rule doesn’t apply to capital they disposed of over seven years ago. However, there’s no such rule in existence.
Can I gift my house to my son and still live in it?
You can remain in the property and avoid inheritance tax if you pay market rent. However, your son may have to pay income tax on this income. Also, your son has the legal right to evict you. So, this defeats the your desire to sell your house to your son to avoid care home costs?
Can I put my house in my children’s name?
Gifting property to your children is a common method of transferring property ownership, often done to lessen the impact of inheritance tax.
However, it’s crucial to bear in mind that such gifting can have financial and other implications.
Do I have to sell my home to pay for care?
If you have time and finances, it is best to consult with financial and legal advisors about setting up a Trust to safeguard your assets.
The cost of such advice can easily run into thousands of pounds – without guarantee that the council will not treat your arrangement as a deliberate deprivation of assets.
One option that is open to you is to sell your home for cash to pay for care home fees. Property Saviour are sympathetic and can make you a fair cash offer for your home.
We will complete the purchase within your timescale – whether it is a couple of weeks or months. We will also release a cash advance to secure a care home place if you require it. There are no fees to be paid, and we will pay £1,500 towards your legal fees.
If you’d like to have a confidential chat fill in the form below for a free call back.
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