When determining whether you will be liable to pay for care home fees the Local Authority will assess your financial circumstances, by examining your assets, including your home, savings and other valuable items. The assessment determines how much, if any, financial assistance you will receive.
Caps on care home fees
The cap of £86,000 (ie how much anyone in England would have to pay for in care home fees over their entire lifetime) created by the coalition government in 2014 was due to be implemented in October 2025. However, it has been scrapped by the Labour Government to help fill the ‘£22 billion black hole.’ As can be seen below, unless you have assets worth less than £14,250.00 (this includes your home) you will have to pay some or all of the care home fees.
So, what are the key points to know about care costs?
- If you have assets of more than £23,250.00 you will have to pay the full cost of care.
- If your assets are worth between £14,250.00 to £23,250.00 you will have to pay some of the fees.
- Below £14,250.00 the local authority will pay the fees
The following link will take you to Warrington Council’s website for further details. https://www.warrington.gov.uk/ASC
How much are care home fees?
Fees do of course vary by location but average fees for care homes is £949.00 a week. Fees for nursing homes is higher at around £1,270.00 a week. One person in seven pays over £100,000.00 in care home fees.
How to protect your property from care home fees
Exploring payment options
There are some options available to help prevent your property from being sold for care home fees, including:
A Trust – this option is particularly relevant to homeowners who own their home as joint tenants. Most people, especially married couples or civil partnerships will each own a 100% share of the property. If tenants in common (this is usually the case if a couple is not married/in a civil partnership) ownership will be split (usually 50/50). The law is quite complicated in this area so it is always best if you are considering this option to take legal advice. This type of trust can be incorporated into your Wills.
Care Annuity – An insurance policy designed to cover long-term care costs.
Deferred payment schemes – Some local authorities offer these schemes as a flexible way to pay for long-term care without immediately selling your home.
Equity release – Releasing equity from your home to pay for care fees. This comes with significant risks, so always seek professional financial advice first.
Rental income – If feasible, renting out your property could generate enough income to cover residential care costs instead of selling it. However, rental income must be sufficient to cover the high yearly costs of care.
It is important to note that the value of your home is disregarded in certain circumstances, eg if your spouse or dependent child, or a relative over 60 is living in your home.
Making a financial gift to your children
Many people think gifting their assets to their children will prevent them from being used for care fees. However, this can be considered Deliberate Deprivation of Assets by the local authority. This means they believe that you deliberately gave away valuable things to avoid paying for care, therefore the gifted assets may still count and action taken to recover costs.
Authorities may consider it deliberate if you:
- Gift away assets shortly before you knew you needed care.
- Spent large amounts of money before a care needs assessment.
- Sold an asset for less than its market value.
If the local authority believes you have deliberately reduced your assets, it could put both you and your children in a difficult financial situation.
Motive and timing are important. A three part test is used:
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- Was avoiding care fees a significant motive?
- At the time of the disposal could the person reasonably expect to receive care?
- At the time of the disposal could the person reasonably expect to have to contribute to it.
Setting up an asset protection trust
Asset Protection Trust (APT)
This is one of the most effective strategies to mitigate care home fees and protect your estate to ensure your loved ones receive an inheritance. The main types include:
Protective Property Trust (PPT)
If you own a property in joint names, you can protect a share of the property after the first partner’s death, preventing care home fees from affecting that portion.
Life Interest Trust
Similar to PPTs, but also allows the surviving partner to receive income from the trust (e.g., rental income) while still protecting the property for beneficiaries.
Interest in Possession Trust
Similar to a Life Interest Trust, but the beneficiary receives income immediately from the trust.
How a trust works
For example, if a couple owns a home worth £400,000 and places half in a trust, only £200,000 would be considered for care fees. If the surviving partner later requires care, only their share of the property is assessed, ensuring some inheritance remains for their children. As well as setting up a Trust in the Will it is also necessary to ensure that the property is owned as ‘tenants in common’ and not ‘joint tenants’ – as stated above most married couples and civil partners own their property as joint tenants.
It will therefore be necessary to have a Deed of Severance drafted and registered at the Land Registry at the same time as the Wills are drafted. This will mean that Jane and John are now tenants in common.
An example: Jane and John own their home as joint tenants. If John goes into care then the value of the home is not taken into account at that point as Jane is still living in the home. However, if Jane dies whilst John is still in care the house would then be empty and the local authority will use the full value of the house can be used against John’s care costs.
If Jane and John are tenants in common they each own a distinct share of the property (as stated above usually 50/50). When Jane dies the local authority can only take into account John’s 50% for his care costs. The remainder of the value of the house (Jane’s 50%) will be distributed to her beneficiaries in accordance with the terms of her Will.
How it works
Upon the death of the first spouse their share is placed into the Trust. The surviving spouse (although only owning half of the property) is allowed to continue to live there. If the surviving spouse has to go into care only their share of the property is taken into account by the local authority. The deceased share is preserved for the beneficiaries.
Insurance options
You may be able to take out insurance to cover long-term care costs. However, policies vary, so seek independent financial advice before committing.
Key takeaways
There are multiple ways to protect your assets from care fees, but each has legal and financial risks.
Gifting assets may still be assessed by the local authority and could lead to financial complications.
Trusts can be an effective way to protect assets, but they must be set up correctly.
Professional advice is essential before making any decisions regarding your estate.
When creating a Trust time is of the essence. It is crucially important to take steps to protect your assets sooner rather than later. As stated, the reason that timing is so important is that the local authority will investigate whether at the time you created the Trust you could reasonably expect that you would need care. Were you fit and healthy at the time? If so, it is less likely that your actions would be seen as a deprivation of assets.
By planning well in advance, you can ensure that your loved ones inherit what you intended while still securing the care you may need in the future.