There are typically 6 ways to pay for your care costs. Read about what they are.
It can be a shock to many people when they find out they may have to pay over £100,000 for their care home costs. Therefore, it is only natural that people are looking at protecting their assets from nursing home fees and looking at how to avoid, and not sell, their property when going into care.
This is especially the case if you are looking to leave your family home to your children.
One of the most regular questions we get asked is how to avoid selling your house to pay for care.
On this page, we will explain:
– The 20 most important questions to consider when thinking about avoiding care home fees or home care costs
– Protecting your assets from nursing homes and how this interacts with the expectations of your local authority
– Putting your house in trust to avoid care home fees and what counts as a deprivation of assets
– How much can you keep before paying for care
– Gifts to avoid care home fees
– If you can you dispose of your assets before going in to care
– How to decide what the best way is to pay for your care costs
– Where you can get financial advice to help determine how to pay your care costs. This is essential if you have complex affairs.
Many people find themselves in denial as their health starts to deteriorate. Even though they approach old age with mobility issues or memory loss, they delay considering residential care altogether.
This means that they don’t make any provisions financially in case they do need to access domiciliary or residential care in the future.
The key to avoiding residential care home fees and home care fees is to get financial advice as early as possible.
Here is a short video that explains what is and isn’t possible.
You can also see this video on avoiding care home fees on youtube.
One option that many people look at is to use equity release to avoid paying care home fees. This allows you to take money out of your home and avoid having to pay care home fees.
Out of curiosity, we recommend you try the calculator below and see how much money, tax-free, you could get out of your house.
The simple answer to this is you cannot simply give your money away.
HOWEVER, there are some circumstances where it may be possible to give away your assets. This means that they are not included, by your local authority, in any calculation to determine the value of your capital when assessing nursing home costs.
As long as all the actions you take are legal, a consequence may be that you are able to avoid care fees.
At the very least, protecting your assets from care fees is not possible if you have assets (including any property) worth over £23,250 collectively. You can read more here about paying for care home costs if you feel you will need to pay these.
£23,250 is the threshold below which local authorities in England will begin to subsidise or fully cover the cost of your care – depending on your circumstances. You can read more about the savings thresholds for England, Scotland, Wales and Northern Ireland below.
Effectively this means you avoid paying nursing home costs yourself. However, even in this instance, council-funded care may not meet your personal preferences or requirements.
How much you can keep before paying for care depends on where you live in the UK.
It is difficult to protect your home and avoid care fees unless your assets are below the threshold in England, Scotland, Wales and Northern Ireland.
How much you can keep before paying for care, and therefore the savings threshold for care home fees, differs depending on which part of the UK you live:
If you have savings and assets above this, then it is likely that you will have to pay for your care. If you share your home with a spouse or partner then you will need to consider their circumstances too.
The above saving thresholds include any savings and income, such as a pension. Your property may be counted as capital after 12 weeks if you move into a care home on a long-term basis.
However, it won’t be counted if, say, your spouse or partner still lives there. Once your savings fall below £14,250, only income is considered for a means-assessment.
You will, therefore, need to think about how you invest your savings to ensure they work as hard as possible for you. Therefore, we strongly recommend that you get financial advice.
“How to not sell your property when going in to care” is one of the most popular questions we get asked and people are keen to understand what their options are.
Many people do look to put their house into a trust, so they can avoid care fees and pass their home on to their children.
However, this is not straightforward and your local authority may look at whether you put your home in trust solely for the reason to avoid your care costs.
There is more information on this below. If you do find yourself having to find a care home, you can read more about it on this site.
Making the right decision at the right time can significantly increase the likelihood of you being able to retain your property, leave an inheritance and keep some disposable income behind for whatever you wish.
Therefore, on its own, you cannot sell your house to avoid care fees unless you have some specific financial circumstances or if your family home has already been put in trust.
This is why early planning is required. You also cannot put your assets into a trust purely to avoid care home costs. There is a risk that this could be seen as a deprivation of assets
Care Homes are expensive and there could be better options out there for you!
Use our Equity Release calculator to see how much money you could get from your home, tax-free!
The money can be used to pay for care, take a holiday of a lifetime, top-up your pension, help your family out financially.......and so much more!
As mentioned above, if you purposefully give away your house, money, wealth, capital or property with the aim of ensuring they are not counted towards a financial assessment for care costs this could be classed as deliberate deprivation of assets. Generally, if you did the transfer a few months before going in to care them this is likely to be seen as depriving yourself of your assets.
Your local authority or council will make an assessment on whether they think you have deliberately given away your assets. If they decide that you have done this with the aim of avoiding paying your care costs, they may still calculate your fees on the basis that you still owned them.
However, the decisions that Local Authorities make can also be challenged.
If you were fit and healthy when you transferred your assets, and could not have imagined needing care and support at the time, then it may not count as deprivation of assets.
To be clear, it is is still possible to put your house into a trust if the reason isn’t to solely avoid care fees. Please read below for more information on how you can do this.
The act of giving away your money and assets is in itself, not the only thing that can be assessed. Deliberate attempts to reduce your money or assets could also be included.
For example, this could include:
– Gifting someone your money, both in and outside your family
– Transferring the ownership of your home to someone else in your family, so they aren’t included in the financial assessment for care fees
– Demonstrating unusual spending patterns and spending large sums on things you may not normally do so
– Gambling with your money
– Buying things, such as jewellery or a car, which might otherwise not be included when you are doing a financial assessment
Many people think about “how to avoid selling your house to pay for care” and decide that they will sign over their house to their children.
However, simply signing your house over to avoid care costs isn’t possible if it is done a few months before you go in to care. This would, in all likelihood, be seen as a deprivation of your assets.
But, if the transfer is done a few years before you go in to care, then it could be possible.
We would recommend you speak to a trust specialist so that they can tell you whether it could work for you. You can find details of who to contact below.
The most common approaches that we see, to give away ownership of your assets, without possibly breaking the rules of your council and local authority, are below.
However, we would recommend you speak to a specialist before you do this:-
One thing you may hear some recommend is what is formally known as ‘disposal of assets’. Again, this is just another type of deprivation of your assets. This is different from putting your house into a trust to avoid care home fees.
This is where individuals ‘hide’ their money, so it isn’t included in a means tests by their local authority or council.
However, despite what some may say this is never a safe strategy – local authorities and councils are increasingly becoming adept at checking up on and identifying those who are disposing of their assets and looking at avoiding care home fees.
When disposal of assets is suspected, you will be means-tested using those funds by default – so you won’t gain anything or benefit from attempting to hide them.
There are often very legitimate reasons that you may have for wanting to give someone a gift via a transfer of ownership of your property. The impact of which, years down the line, maybe that the value of these assets are not counted when assessing whether you need to meet your care fees.
Therefore, it is possible to transfer money and give gifts to avoid care home fees. However, do get financial advice before you make any gifts so that you are aware of any potential consequences.
Being proactive with dividing your assets early can stop any issues further down the line, and you can do it whilst you’re in full control
You may want to help your children out with the purchase of a home or start a business, so you give them the money to do so
During your lifetime there may have been an individual that was very supportive and has made a strong contribution to your lifestyle, and you want to thank them for that
If you still retained the property in your sole name on death, a grant of probate would be required to deal with it.
The task of looking after and maintaining your property may become difficult. Therefore, you may wish someone else to have the responsibility to look after it.
Giving away your home is something that you need to think carefully about. Many people think that they can protect their assets from nursing home fees by just giving them away. Please read below about the concept of notional capital and how it could apply to your circumstances.
However, by giving away the ownership of your assets and, say your family home, it can leave you financially exposed in other ways, even if the person that you gifted the property doesn’t intend to do so.
Examples of this would include:
Bankruptcy – You never know what may happen in the future. If the person you gifted the property to has financial problems or becomes bankrupt, it is possible that the property would be taken to who the debt is owed
Divorce – If the person who received the gift gets divorced, then your home will make up the value of the estate that needs to be divided on divorce
Death – If the person who was gifted the property was to die, then the property will be passed on along the wishes set out in their Will. These may not be in line with what you would have wanted
Family – Unfortunately, family members fall out all the time. Therefore, if you are on the wrong side of the fallout, it is possible that you could also lose your property.
Sometimes, a less risky approach to avoiding care home fees, and just giving the money and wealth away as a gift, is to put your house into a trust instead. Whilst on its own a Trust won’t always stop you avoiding care fees they can potentially be used to mitigate them.
Therefore, whilst it may seem appealing putting property into a Trust to avoid care home fees, it is something you need to be very careful about.
However, that said, there may be other very real reasons as to why you have to put your property into a trust. A consequence of this is that your property may then excluded from any financial assessment. So, in the right circumstances, it is possible to avoid meeting care fees without it being seen as a deprivation of assets.
Whilst this approach may seem the perfect way to use a trust to avoid care costs, the reality is that it is far more complex.
With many councils under financial pressure, they are proactive in looking for cases where people are using trusts to avoid fees. In these types of cases, they may well challenge the reason behind using a trust.
Essentially a trust is something that is legally recognised and can be enforced by a court of law. The rules are often set out in the trust deed and rules, and these dictate how the trust will work.
A trust is a legal entity in itself. It will have its own bank account and assets. Due to this, when the Trust is set up, it is registered with HMRC.
The trust will have a set of Trustees who are responsible for looking after the rules of the Trust. Typically, it is your children that are named as the Trustees.
There are many different types of Trusts that you can use. Three examples are:
– Protective Property Trusts – They allow you to save a portion of your property to pass on to loved ones. They are also known as ‘Property Trust wills’
Here is a short video that explains how a Protective Property Trust works.
You can also see this video on Property Protection Trusts on youtube.
– Life Interest Trusts – Allows you to allocate a beneficiary (usually yourself and/or a spouse /partner or family members) who then has the legal right to receive income from or use a property named in the trust
– Interest in Possession Trusts – It’s a kind of trust fund set up to entitle the beneficiary to any income as soon as it is produced. They are very similar to Life Interest Trusts.</span
The extent of the power your Local Authority has can often be challenged as there is at times some subjectivity involved.
However, you should note that if you do enter care within 6 months of gifting your assets and property, the council can still send the bill for the care costs to the person that the gift was gifted too. So, if for example, you gave your family home to your children, then they could be responsible for meeting your care fees.
Likewise, if you set up a trust, the local authority can still approach the Trustees of the trust, irrespective of the time it was set up.
The difficulty with gifting assets is that there is no legal time limit in which the local authority can assume that you have ownership of the asset even if you have given it away.
You could have gifted your assets many years previously, and they can still count.
Whilst it is not a hard and fast rule if the gift was made whilst you were in good health then it is harder for the local authority to link the giving away of the asset with the aim of avoiding care fees.
The value of the assets that were given away is called ‘notional capital’.
The value of a person’s ‘notional capital’ will be included in their overall asset value when they have their financial assessment.
So, in the example of giving your family home to your children, not only could you end up with the double whammy of having to pay for your care and also not having a house to fund your care costs.
In short, the answer to this is maybe. All funding options should be considered, and it is important that equity release is considered as part of that. You can read more here about how equity release works.
Here is a short video that explains what equity release is.
You can also see this video on how equity release works on youtube.
Essentially, a scheme will allow you to borrow money against the value of your family house. However, it will only be available if you intend to receive care at home.
Many schemes will not apply once you move into a care home. If you are able to access it, you can use this to meet your care costs, make home improvements to make life a little more comfortable and continue living in your home. The lending is then only repaid on death.
The popularity and growth in these schemes is something we strongly suggest you consider if you decide to take care at home. This is a very complex area, and you do need to seek advice.
This video talks about the pros and cons of equity release.
The amount that you can get as a tax-free lump sum will depend on the value of your property.
Try the calculator below to see how much money you could receive to help pay for your care costs.
We have a directory of UK care fees funding specialists who can give you advice on care home fees and what the best options are for you to manage your money and wealth and not pay any more than you need to for your care.
Click here to look for a care fees advisor in your local area.
With a number of options on the table (each with rather complicated criteria and features) it can be difficult to feel confident in making a decision.
You want to ensure that whatever decision you make is right for you – which is why information and professional advice is key.
Your choice will depend on your personal financial situation and preferences – but there are a few key things you’ll need to consider.
Your funds and assets: How much money do you have? This includes savings, bonds, shares, your family home and other assets
Your prognosis: Is your health likely to stay the same or deteriorate? Have you budgeted for either eventuality?
Inheritance Plans: If you wish to leave money or property to your relatives this will affect the type of care funding you choose. Likewise, you may be thinking about inheritance tax planning.
Benefits and pensions: Are you claiming everything you’re entitled to? Could choosing one of care funding option mean that you lose your benefits? Women and men whose spouse or civil partner died before 2005 in the armed services may also be entitled to an additional War Widows or War Widowers pension
You can find details of which benefits you may be entitled to on the gov.uk website or through booking an appointment at your local Citizens Advice Bureau
Personal preferences: If you are very specific about the type of care home you’d like to live in (perhaps you already have one in mind) – it’s important to know the cost of this and ensure you can meet that cost indefinitely
Local authority provision: Some local authority care homes are very good. Others are not. The deferred payment schemes offered by councils also differ geographically. The quality of council care homes in your area (and the funding assistance on offer) may influence your decision
Click here to find a care fees advisor in your local area.
The good news for individuals requiring care and their families is that there are plenty of funding options on the table – provided the financial aspect of care is considered early enough. The sooner provisions are made, the more flexible options you have.
Careful planning can ensure you fund your care in the most efficient way possible and avoid paying any unnecessary costs. An advisor can help you look at your options as well as ensure you claim all of the benefits you are entitled to. Therefore, mitigation rather than avoidance is the key.
Options include (but are not limited to) the following. You can find out more about each of these in our handy guides:
However, this can also be a challenging prospect – as with so many options available, it can be difficult to know which choice to make. This is why sound, professional advice is so important.
Here is a short video on the 12 different ways to pay for care.
Care Homes are expensive and there could be better options out there for you!
Use our Equity Release calculator to see how much money you could get from your home, tax-free!
The money can be used to pay for care, take a holiday of a lifetime, top-up your pension, help your family out financially.......and so much more!
This article was written by Rose Walters, a published writer that has written on a range of care related topics. Rose writes from a lot of personal experience and is able to bring this in to the writing alongside the specialist knowledge she has on these topics.
