Will I Have to Sell My Home to Pay for Care? Understanding Care Fees and Protecting the Family Home
“Will I have to sell my house to pay for care?” It is one of the questions we are asked most often, and it is easy to see why. As we live longer, the likelihood of needing some form of long-term care increases. For many families, the home is their most valuable asset, and the possibility of losing it to fund care costs is one of their biggest concerns.
The good news is that the answer is not always yes. How care is funded depends on your circumstances, who lives in your home and, importantly, the planning you have in place. In this article we explain how care is paid for, when the family home is and is not taken into account, and why the timing of any planning matters.
Why care costs matter to so many families
Care is not a distant or unusual concern. Over 1 million people in the UK are living with Alzheimer’s disease or another form of dementia, and many more need support as they grow older.
The cost of that support can be significant. The average cost of a month in residential care is around £4,000, rising to £6,000 or more for nursing care. Over the last 30 years, successive governments have attempted to reform adult social care funding, but no long-term solution has yet been implemented. For now, many families will need to contribute towards the cost of care themselves.
How is care paid for?
If an adult in England requires care, the Local Authority will usually carry out a financial assessment, known as a means test. The assessment considers assets such as:
Property
Savings
Investments
Certain pension income
In England, individuals are generally expected to contribute towards their care costs until their capital falls below £23,250. Once assets reduce further to £14,250, the Local Authority may meet the full cost of eligible care, subject to assessment.
The rules differ in Wales, where the capital threshold is currently £50,000. This means individuals may receive financial assistance sooner than they would in England.
Will my home be included?
Not necessarily. Property is not normally included in a financial assessment if it continues to be occupied by:
A spouse or civil partner
A partner
A close relative aged 60 or over
Certain dependent or disabled relatives
Where a property is included in the assessment, the Local Authority may offer a Deferred Payment Agreement. This allows care fees to be paid on the individual’s behalf and recovered when the property is eventually sold. Interest and administration charges may apply, so it is important to understand the terms before entering into an agreement.
Can I give my home to my children to avoid care fees?
Many people believe that giving away their home, or transferring assets to family members, will automatically protect them from care fees. Unfortunately, this is not always the case.
Local Authorities have the power to investigate transactions where assets have been given away or transferred to reduce a person’s ability to pay. This is known as Deprivation of Assets.
What is Deprivation of Assets?
Deprivation of Assets occurs when someone intentionally reduces the value of their assets in order to qualify for Local Authority support with care costs. If the Local Authority believes this has happened, it may assess the person as though they still own the asset, even if it has been gifted or transferred.
Examples that may be treated as deprivation include:
Gifting large sums of money to family members
Transferring a property to children or other relatives
Selling a property for significantly less than its market value
Moving savings into another person’s account
That does not mean you cannot spend or share your money. The following are usually acceptable:
Normal spending, such as holidays and home improvements
Modest gifts made as part of normal family arrangements
Estate planning decisions taken well before care needs were foreseeable
Paying off debts or legitimate expenses
Why early planning makes the difference
The earlier planning is considered, the more options may be available. Decisions made well before any care need is foreseeable are viewed very differently from those made once care is on the horizon.
Where a property is jointly owned and one owner later requires care, there may be opportunities to protect part of the property’s value. Additional planning options may also be available where a property is solely owned, or where neither owner currently requires care.
The way your property is owned, together with the type of Will and estate planning arrangements you have in place, can make a significant difference when it comes to protecting family wealth for future generations. As circumstances, assets and legislation change over time, these arrangements should also be reviewed regularly to make sure they remain effective.
In summary
Needing care in later life does not automatically mean losing the family home. Who lives in the property, how it is owned and the planning you have put in place all affect the outcome. What rarely works is a last-minute transfer of assets, which can be treated as Deprivation of Assets.
Professional advice should always be sought before acting, as every family’s circumstances are different.
Speak to Sanctuary Tax & Trust
At Sanctuary Tax & Trust Services, we help families understand their options and put appropriate estate planning measures in place to protect assets wherever possible, while remaining fully compliant with care funding and Local Authority rules.
Every family’s circumstances are different. If you would like to discuss your own arrangements, concerns or future plans, you can book an appointment at a time that suits you. A member of the Sanctuary team will help you understand your options and whether any action may be appropriate for your situation.
