Can having a Will protect your home from care home fees?
For care home fees, the government takes a look at your assets, for example, your property, savings and valuable items. This determines how much you should contribute before the government provides financial assistance.
Using a will is a great way to mitigate against this and there are steps you can take to successfully to do this.
Having a Will should be seen as an investment and it is important to seek professional advice when having your Will drafted. The process can be complex but need not be expensive.
Changes to care home fees in 2023
From October 2023, the government introduced an £86,000 cap on how much anyone in England would have to pay for in care home fee over their entire lifetime.
So, what are the key changes to care costs?
- If you have assets of more than £23,250.00 you will have to pay the full cost of care fees.
- If your assets are worth between £14,250.00 to £23,250.00 you will have to pay some of the fees.
How much are care home fees?
Fees do of course vary by location but the average fees for care homes is £949.00 a week. Fees for nursing homes is higher at around £1,270.00 a week.
How to protect your property from care home fees
Exploring payment options
There are some payment options available to help prevent your property from being sold for care home fees, including:
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.
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 needing care.
- Spend large amounts of money before a care needs assessment.
- Sell 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.
Many people assume that transferring assets and surviving for seven years avoids this issue (the ‘7 year rule’), but this only applies to inheritance tax and not care home fees.
Setting up an asset protection trust
Asset Protection Trust (APT)
This is one of the best ways to protect your estate and 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.
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.
It is important to take steps to protect your assets sooner rather than later. The reason that timing is so important is that the local authority will investigate whether at the time you took those steps 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 in advance, you can ensure that your loved ones inherit what you intended while still securing the care you may need in the future.
