The idea of spending your final years in care is daunting enough without the added anxiety of watching your life’s biggest asset, your home, being depleted to pay for it. Yet for many people, that’s exactly what happens. Care home fees can be devastating to an estate, leaving little or nothing for the people you’ve worked hard to provide for.
One of our clients recently mentioned that his current care home charges £2,000 a week. That’s over £100,000 a year. Over just five years, it could consume £500,000 or more from your estate. For most families, that means the family home is sold to cover the costs, and the inheritance your children were expecting simply disappears.
There is a way to protect part of your estate, but it requires planning while you still have mental capacity, and it demands specialist legal advice. This article explains how property protection trusts work and why acting early matters.
What Is a Property Protection Trust?
A property protection trust is a legal structure included in your will that allows you to ringfence part of your estate so that it won’t be counted as an asset if you later need means-tested care funding.
The key principle is that a trust allows your spouse or partner to benefit from assets while the trust itself retains ownership. This distinction is crucial because the local authority counts only assets that your spouse personally owns when assessing finances for care fees. Your spouse can use their own personal estate to pay for care, while the assets held in trust pass intact to your children after they die.
This approach uses a legitimate legal structure to protect part of what you’ve built over a lifetime, rather than attempting to hide assets from the local authority.
How a Property Protection Trust Can Work
As an illustrative example, Mr and Mrs Smith own a home worth £240,000 and have savings of £10,000. With specialist advice, when Mr Smith’s will is written, his 50% share of the family home (valued at £120,000) can be placed into a trust. Mrs Smith can continue to live in the home during her lifetime, while the £120,000 is held in trust and owned by the trust rather than by her.
A few years later, Mr Smith passes away. His half of the house passes into the trust as outlined in his will. Mrs Smith continues to live in the home. She still owns her 50% share, worth £120,000, plus they have joint savings of £10,000.
Years later, Mrs Smith requires residential care. The local authority carries out a financial assessment of her assets, which is her 50% share of the house (£120,000) plus the savings (£10,000). The £120,000 held in trust is excluded from this assessment because the trust owns it, not Mrs Smith, so it forms no part of her means-tested estate.
As care fees deplete Mrs Smith’s personal assets, she continues to pay until only £23,250 remains (the current threshold for local authority support). At that point, the council begins to help with care costs. Without the trust her entire personal estate could have been spent down to this same threshold depending on the amount of the care home fees and how long she required care.
When Mrs Smith eventually passes away, her children inherit both what remains of her personal estate (around £23,250) and the full £120,000 protected in the trust, totalling approximately £143,250. Without the trust in place, they would have received only £23,250. The trust protected £120,000 that would otherwise have been lost to care fees.
Tenants in Common vs Joint Tenants
For a property protection trust to work, your home must be owned as “tenants in common” rather than as “joint tenants.” This distinction matters significantly.
If you own your home as joint tenants, legal ownership automatically passes to the surviving owner when one of you dies, bypassing your will entirely. You cannot ringfence part of it in a trust because it will simply become your spouse’s property, and all of it will be counted as an asset if they later need care funding.
If you own your home as tenants in common, each of you owns a separate, distinct share. Your share passes according to your will, which allows each half to be treated differently. Your share can go into a trust while your spouse continues to live in and benefit from the home.
Many couples don’t realise which way they own their property. As part of setting up a property protection trust, a specialist solicitor will help you confirm this and, if needed, help you change the ownership structure.
Be Aware of the Deprivation of Assets
You should know upfront that setting up a trust specifically to avoid care home fees carries a significant legal risk known as “deprivation of assets.”
If the local authority determines that your primary motive for putting your property into a trust was to avoid paying for care, they have the legal power to challenge the arrangement by ignoring the trust, treating you as still owning the property, or challenging the transfer entirely.
The key to minimising this risk is transparency. Professional legal advice creates the evidence that protects you. When you discuss this openly with a specialist solicitor during your initial consultation, document the reasons for the trust, and follow proper legal procedures, you create a record showing the transfer was completed legitimately with independent professional guidance when you had full mental capacity.
A clear paper trail with solicitor involvement significantly reduces the authority’s likelihood of successfully challenging the arrangement.
This is why, at DSM Legal, we cannot stress enough that you should not attempt this without specialist legal advice.
Set Up Your Trust While You Have Mental Capacity
A property protection trust must be set up through your will while you maintain full mental capacity to make decisions. You cannot put this in place after a dementia diagnosis or after moving into care.
This timing requirement is one of the most common misconceptions people hold. Many assume they can decide later if needed, but the local authority will challenge transfers made by someone who has already lost capacity, and courts will refuse to uphold them.
If you’re in your 60s considering long-term planning, now represents the moment to have this conversation with a specialist. Waiting until a health crisis requires you to create a trust could mean you’ve forfeited the opportunity.
Being Clear on the Limitations of a Property Protection Trust
A property protection trust offers partial, rather than complete, protection from care costs. Your personal assets will be used to pay for care until you reach the threshold where the local authority steps in. The strategy ensures that a portion of your estate, typically the share of the family home contributed by the first spouse to die, remains protected and passes to your beneficiaries.
This approach does not provide a mechanism for leaving the family home entirely to your children while avoiding all care costs. The goal is to protect some of your legacy and preserve a meaningful inheritance, rather than circumvent care costs entirely.
The strategy functions only when you plan and retain capacity. Once capacity is lost, you cannot put this in place retroactively.
Why Professional Advice Is Essential
This process involves genuine complexity. The connections between trust law, family law, and social services law means that errors have serious consequences, extending beyond financial cost to potentially undo the entire protection you were attempting to create.
You require someone who understands wills and trusts and can connect them to means-testing rules, deprivation of assets law, and your local authority’s specific financial thresholds. You need someone who can advise whether your home ownership structure requires changing first and who documents everything to create a clear record should the local authority ever question the arrangement.
This task demands specialist knowledge and specific legal advice. It shouldn’t be left to templated wills or a DIY approach.
How DSM Legal Can Help with Property Protection Trusts
At DSM Legal, we specialise in helping clients navigate these complex estate planning decisions. Diane Massey is a STEP-qualified legal professional, which means she meets strict standards in trust and estate planning law.
We understand that every family situation is different. Some clients need a full property protection trust; others might benefit from a different structure depending on their circumstances. Our approach is to discuss your specific situation, explain your options honestly, and recommend the solution that works best for your needs.
We charge a fixed fee of £2,500 including VAT for setting up a property protection trust. There are no hidden charges. This covers full specialist advice, tailored to your circumstances, and a properly documented trust structure that protects you against deprivation of assets challenge.
What Should You Do Next
If you’re worried about care home fees eating into your family’s inheritance, start a conversation with DSM Legal. We’ll discuss your situation, explain whether a property protection trust is right for you, and answer any questions about how it works.
You face no obligation, and there’s no urgency, though the sooner you act, the more clearly documented your intentions become and the stronger your protection grows.
To arrange a consultation, contact DSM Legal today through our website, or call 01925 937070.