This page was last updated on 1 November 2020.
Avoiding care home fees
This article answers the most frequently asked questions about care home fees avoidance. It tells you important information about:
- Who pays the fees
- The average care fees in the UK
- What deprivation of assets is
- Ways you can protect your house and avoid selling your property
It is extremely important to find a specialist adviser for more financial advice and legal advice.
Intentionally trying to avoid care fees will be classed as deprivation of assets, and you will find that the local authorities have been cracking down on this.
However, there are still things that you can do that could potentially exclude your home from any care fees assessment.
Topics that you will find covered on this page
Who pays for care home costs?
It may come as surprising news to learn that many people are responsible for paying their full care home costs.
A person is responsible for funding their own care if the valuation of their personal assets exceeds the national threshold.
This savings threshold is different in England and Northern Ireland than it is in Wales or Scotland.
If your assets are over the threshold, you will be classed as a self-funder. You will then be expected to pay your charges in full from your own income, savings account, or property’s value.
However, even if you are found to be over the threshold and need to self-fund, you might be eligible for other forms of financial help towards paying your fees. For example, you may be able to get support such as:
You should speak to a financial adviser to get more personalised advice and information. They will be able to discuss your funding options when it comes to paying care fees, give you advice, and help you budget properly.
If you do find that you need to pay your own costs then it is worth looking at an immediate needs care annuity, which covers the cost of care.
How much savings can you have before you have to pay for care?
The savings threshold for care home fees changes depending on whether you are living in England, Wales, Scotland, or Northern Ireland.
In England and Northern Ireland, the savings threshold is £23,250.
In Wales, the threshold amount is £24,000.
Finally, the savings threshold for the cost of care in Scotland is £27,250.
Here is a video that explains more about what is and is not possible.
How much will local authority pay for care home?
If your local council has given you a care needs assessment and found that you are in need of a care home place, then local authorities will also arrange for you to have a financial assessment or means test. This is so that the local authority can calculate how much financial support you are eligible for.
- The areas they will look at during this means test include:
- your savings
- your income
- any other financial capital including investments
- in some cases, your family home and property
If you are moving into long-term care, the value of your house will also be included in the financial assessment. Your family home property will not be included in the means test calculation if you only need a short-term stay, or if there is another family member still living in the house, such as a partner or a child under age 18 years old.
After the council has received an estimate of your capital from the assessment, you will be deemed either eligible or ineligible for authority funding.
In some cases, local authorities may be prepared to pay for your fees, but not fund the full cost of your preferred destination.
If this happens, a third party such as a friend or family member may wish to contribute money towards the rest of the cost of care home fees to help you. This ‘third-party top-up fee’ would be provided to cover the differences between what the council is offering to pay and your total care costs.
What are the average care home fees in the UK?
In 2019, the average care home charges in the UK was £33,852 per year. Nursing UK fees are even more expensive, averaging at £47,320 per year.
The amount you will need to spend on care costs depends on:
- Your care needs and the level of support you require. For example, nursing prices are higher than for a standard care place.
- The quality of the care home that you are using. Higher quality care homes tend to be more expensive, but you may have more comfortable surroundings and get nicer meals.
- The exact region where you live in the UK
Costs per week vary considerably between regions.
For example, research showed that expenses in London had a weighted average of over £700 per week. At the same time, residential care fees were only just above £500 a week in the North West of England.
For more advice on how fees vary across regions, you can use this calculator.
Is there a care home fees cap?
There is currently no cap for the costs of residential care home in the UK and many people are shocked to discover the news that they may need to pay over £100,00 for their care.
However, if you are self-funding and the value of your assets and capital ever begins to run below the £23,250 savings threshold, you can request a new assessment from the local council.
So, if you expect that your finances will fall bellow the threshold within the next few months, then you should get in touch with the local authority.
The local authority should organise a means test for you quickly so that you don’t end up spending more money than you have to.
What is deprivation of assets?
Deliberate deprivation of assets is when you try to decrease the total valuation of your wealth so that you don’t have to self-fund the care you need.
There is no limit to how far back the local authority can look to work our whether any care home fee avoidance has taken place. If the council concludes that you intentionally reduced your income, property or savings, then they might calculate how much you need to put towards the cost of your care home as if you still had the money you spent or gave away.
So, if you try to avoid care fees you may end up being required to spend more money than you can actually afford.
- There are multiple behaviours that could be classed as a way of intentionally reducing your money to avoid care fees:
- Giving away of a large lump sum of money to a loved one
- Gambling away your money
- Suddenly making lots of purchases in an uncharacteristic way, either as gifts or for yourself
- Spending lots of money on a holiday
- Signing house over to avoid care costs by transferring the property deeds of your family home to another member of your family.
- Buying expensive possessions that are normally not included in a means test, such as jewellery or cars
However, there are two main factors that the local council will take into account before making a conclusion about whether deliberate deprivation of assets took place:
- You need to have known that you would soon be paying care fees at the time. If you were fit and healthy and could not have predicted that you would be self-funding in the near future, then you could not have been avoiding paying for care homes.
- Avoiding care home or nursing care fees must have been a motivating factor in giving away or reducing your total wealth. The intention is the most important factor that the authority will take into account when investigating your spending.
Gifts to avoid care home fees
Giving away money or assets will not always be considered deliberate deprivation of assets. If you could not reasonably have known that you would soon need care, then you could not have been trying to avoid care costs by making the gift.
Some reasons you may be giving gifts of money or assets, without intentionally attempting to avoid paying for care, are:
- That you want to help loved ones who are struggling financially
- You are still in good health and want to go on a well-deserved holiday in retirement
- You would like to see your children or grandchildren enjoy a gift of tax-free money
But you should be very careful when you make gifts from your income or savings. If the council thinks you did this to avoid care home charges, then there may be serious consequences and the capital you used to have could be included in your financial assessment.
How to avoid selling your house to pay for care
It is understandable that you might want to search for options and advice about how to protect assets, such as the house you live in, when it comes to paying for care in the future.
There are several options on offer that a person could consider. For example, Trusts, equity release, and deferred payment agreements, are all things that people have done while they still live in good health. However, you must be careful that your intentions are correct and you do not attempt any deprivation of assets.
Can I protect my home from care costs?
One way to help afford the cost of care for yourself or your partner while keeping ownership of your property is equity release. Equity release schemes allow you to access some of the value of your home without having to sell it.
There are two main types of equity release on offer: lifetime mortgages, and home reversion plans.
Lifetime mortgages are the most popular, and these can be a great option for older people needing to fund home care costs or residential care. Essentially, a lifetime mortgage is a loan which is secured against your home.
This money you get can either take the form of a tax free cash lump sum, or a series of smaller withdrawals. The way you unlock your money depends on the lifetime mortgage product that you choose.
You don’t need to make any monthly interest payments. Instead, the rate is fixed for the mortgage term (until your death). The loan and all the interest which has rolled up will simply be paid off after your death, when the provider will sell your house.
To qualify for a lifetime mortgage, you must own a UK property worth £70,000 or more. You must not have any other debts or mortgages secured against your home, or you must use the money you release upon completion to pay off all debts of this kind.
Like all equity release, these products carry certain risks and may impact your tax position and entitlement to state benefits. Therefore, it is important for you to speak to specialist financial advisers in order to make an informed choice about whether equity releasing services are the best way for you to protect your home when paying for care.
What are deferred payment schemes?
A deferred payment agreement is a loan provided by your local council to help towards the cost of care. This loan from your local authority is secured against your home, and will usually have fixed interest rates.
It allows you to keep ownership of your home and delay paying the bills for your room in a care home until after your death. Even if a means test finds that you do not qualify for financial support from your local council, you may still be eligible for a deferred payment scheme.
It is also worth knowing that you can usually rent out the property in addition to using a deferred payment scheme when paying for care homes. You could then put that extra income towards affording the care place that you would like most.
Can you put your house in Trust to avoid care home fees?
Something else older people needing to cover care costs may be considering is putting their home into a Trust. If you put house into Trust, you can assign ownership of your property to somebody else such as your children.
However, it is important to know that doing so in order to avoid paying the fees that you owe will be classed as deliberate deprivation of assets.
If the council suspect that you could have known at the time of setting up a Trust that you would soon have to pay the cost of nursing care or care home services, then you will not gain any benefit and will actually be negatively impacted by gifting these assets.
So, you must have other legitimate reasons for using Trust services, and not simply be putting property into Trust to avoid care home fees.
You need to assign a proportion of the property ownership to your family member (such as children) while you are still fit and healthy.
Children are usually the ones named as Trustees.
- Provided you are still healthy and don’t need care, you can put a house into Trust schemes such as:
- Protective Property Trust. This kind of Trust lets you to ring-fence a percentage of your property for your loved ones to inherit after your death. They also go by the name as ‘Property Trust wills’.
- Interest in Possession Trust. This particular Trust fund may be set up to provide a beneficiary with an entitlement to income as and when it is produced.
- Life Interest Trust. You can use these Trusts to designate beneficiaries who will then have a legal right to use and take an income from the property named in the Trust.
You must speak to a legal specialist if you are considering the possibility to put house in Trust to make sure that it is set up correctly.
How do I protect my assets from nursing home expenses?
Hiding money from social services and protecting your assets from nursing homes expenses is also against the rules of the law. Local government has been cracking down on those intentionally using Trusts to gift their property to their family and avoid fees.
However, if you are giving away assets and property to Trustees such as children or a partner while still healthy, and are not expecting to have to pay for nursing care in the near future, then there are routes such as the ones above which could be taken.
A professional specialist can give you more financial advice about ways you can pay for care services or nursing home fees. Make sure to contact a legal adviser before attempting to put your house away into a Trust or release equity from your home. They will talk you through things and help you find the best one for your situation.
More information related to paying for care
Paying For Care
If you feel that you need extra support around the house, or that you need to move into a residential care home, then you may be worried about how you are going to pay for care. Unfortunately, social care is not cheap. While the exact cost of your care will depend on your personal care needs, care fees can easily run in excess of £100,000.
Care Home Costs
Most people are responsible for paying for the full cost of their social care. You will be considered responsible for paying for care home fees if the valuation of your personal assets exceeds the national threshold. The savings threshold is different in England and Northern Ireland than it is in Wales or Scotland. Therefore, the are costs can also differ.
Home Care Costs
If you are thinking about receiving care and support at home, then you may be worried about how much your home care is going to cost. While it is true that the cost of home care is generally far less than the cost of residential care, home care can still amount to a considerable sum. Indeed, it is very common for the cost of in home care to run in excess of £13,000 per year.
Avoiding Care Home Fees
It may come as surprising news to learn that many people are responsible for paying their full care home costs. A person is responsible for funding their own care if the valuation of their personal assets exceeds the national threshold.
Immediate Needs Care Annuity
An immediate care annuity is an option that can give you peace of mind. Essentially, it is an insurance policy that covers your care fees for the rest of your life by providing you with a guaranteed lifetime income.
NHS CHC stands for NHS continuing healthcare, with continuing meaning long term life care. Health and social care can be expensive, especially if you have no savings, income, or other finances.