Care Home Fees and Your Family Home: Myths, Risks and Planning Opportunities

For most people, the family home is one of their most significant assets and often carries strong emotional ties. It is therefore understandable to be concerned about how future costs could affect your family home and the inheritance you wish to leave to your children or grandchildren.  

There is no shortage of information online about “protecting” a home from care fees, including suggestions that transferring a property into a trust or giving it to family members will automatically prevent it from being taken into account. 

The reality is considerably more complex. 

There is no guaranteed method of ensuring that assets will not be taken into account when assessing a person’s ability to contribute towards the cost of care. The way care fees are assessed depends on an individual’s circumstances, the nature and value of their assets, their care arrangements and the circumstances in which any assets have been transferred or otherwise dealt with. 

In this article, we examine some of the key questions surrounding care fees and explore why taking action early can provide greater clarity, flexibility, and peace of mind for the future. 

How are care fees actually assessed? 

When someone has care and support needs and a local authority is responsible for meeting those needs, a financial assessment will usually be carried out to determine what contribution the individual should make towards the cost of their care. 

This is commonly referred to as a ‘means test’. 

The assessment will consider relevant income and capital, subject to the rules governing what is and is not taken into account. For care in a care home, the current capital limits are £14,250 and £23,250. Generally, people with capital above the upper limit will normally be responsible for the full cost of their care (subject to the applicable rules), while those with capital between the limits may be required to contribute towards their care from both income and capital. Those below the lower limit may still have to contribute from their income.  

The rules are more complex than automatically deducing that if somebody owns a house, they will be utilising this asset to fund care. The value of a person’s main or only home may, in certain circumstances, be disregarded when the financial assessment is carried out. 

For example, there are circumstances where the property must be disregarded if a qualifying relative, such as your spouse, or a child under 16, continues to occupy it as their main or only home. There are also specific rules concerning temporary stays in care and other circumstances in which a property may be disregarded.  

Whether your home will be considered to cover care fees will therefore depend on your circumstances and the relevant care arrangements.  

Can I simply put my home into trust? 

One of the most common questions in later-life estate planning is whether transferring the family home into a trust will mean that it cannot subsequently be considered when care fees are assessed. 

There is, unfortunately, no automatic protection of this kind. 

Trusts can be appropriate and valuable estate planning tools, but establishing a trust does not, by itself, guarantee that an asset will be disregarded when a local authority assesses a person’s financial position. 

There can also be other, significant, consequences of transferring a property into trust. Transferring the property can cause implications with ownership, control, taxation, inheritance, and your ability to deal with the property in the future. 

It is therefore important that a trust is not viewed simply as a mechanism for dealing with potential care fees. 

A properly considered trust can absolutely have a legitimate role within an individual’s wider estate plan, but whether it is appropriate will depend on your individual circumstances. 

So, what is ‘deliberate deprivation of assets’ and why is this important? 

The Care and Support Statutory Guidance sets out circumstances in which a person may be considered to have deliberately deprived themselves of capital or income, in order to avoid or reduce the amount they are required to pay towards their care and support. 

Where a local authority considers that there is evidence of deliberate deprivation, it may take the relevant asset into account as notional capital (i.e., you are still deemed to possess it) when carrying out the financial assessment. The local authority in certain circumstances may even seek to recover the resulting loss from a person to whom an asset has been transferred. In other words, someone seeking to put their home out of reach of consideration for care and support fees can see their actions entirely reversed. 

Crucially, it is not just when the property was transferred that matters, but the intention behind the transfer.  

The statutory guidance states that a local authority should consider whether avoiding or reducing care charges was a significant reason for the disposal of the asset. Circumstances and the evidence surrounding the transaction will therefore need to be considered. 

This is one reason why it is misleading to suggest that there is a particular period of time after which a gift or transfer of the family home or other asset will automatically be “safe”. There is no simple rule that means a transaction will necessarily be ignored merely because it took place a certain number of years before care was required. 

For example, transferring a property to family members at a time when care is already reasonably foreseeable, with the intention of reducing the assets that may be taken into account by the local authority, can raise very different issues from an estate planning decision that was made for genuine family or succession reasons, as part of your wider lifetime planning. 

The wider circumstances of the transaction often matter far more than people realise.  

So, when can trusts actually be useful? 

Although trusts should not be presented as a straightforward solution to future care fees, they remain an important part of estate planning in appropriate circumstances. 

For example, a trust may sometimes form part of your planning where you want to: 

• provide for a vulnerable or financially dependent beneficiary; 

• take account of the circumstances of a second marriage or blended family; 

• undertake succession or bloodline planning; 

• provide a framework for managing family wealth across generations; 

• consider particular inheritance tax or other tax-planning issues, where appropriate; or 

• establish arrangements for how assets should be managed for particular beneficiaries. 

Whether a trust is suitable for you will depend on your individual’s objectives, family circumstances and the nature of the property or assets involved. 

There can also be legal, tax and practical consequences associated with creating and administering a trust. A trust should therefore be considered as part of a wider estate plan rather than as a standalone answer to concerns about care fees. 

Other areas of estate planning to consider 

Concerns about future care costs can sometimes lead people to focus exclusively on the family home. However, later-life planning is much broader than property ownership. 

A comprehensive review may include considering: 

Wills 

A Will allows you to set out how your estate should pass on death. Reviewing your Will periodically is particularly important where there have been changes in your family circumstances, assets or relationships. 

Lasting Powers of Attorney 

A Lasting Power of Attorney can allow someone you trust to make decisions on your behalf if you become unable to make them yourself. 

There are different types of Lasting Power of Attorney, including arrangements covering property and financial affairs and those covering health and welfare. 

Putting appropriate arrangements in place in advance can make it easier for trusted people to assist if you subsequently lose the ability to manage your own affairs. 

Property ownership 

The way a property is owned can have important consequences for estate planning. For example, married couples and civil partners may wish to consider how their property is held and how this interacts with their wider estate planning arrangements. 

Property ownership should be considered alongside the Will and the family’s wider circumstances rather than as a standalone issue. 

Lifetime planning 

Estate planning does not necessarily begin and end with a Will. Depending on your circumstances, it may involve considering lifetime gifts, trusts, property ownership, tax considerations and arrangements for managing your affairs during your lifetime. 

Any such decisions should be made with a clear understanding of their potential consequences. 

Why does early advice matter to me? 

One of the most important aspects of later-life planning is the timing. 

Seeking advice early does not guarantee that assets will be protected from future care costs. It can, however, provide an opportunity to understand the legal position and consider the options that may be appropriate for your circumstances. 

By contrast, decisions made when care is already required, or when a move into residential care is imminent, is likely to leave less scope to consider longer-term objectives. 

Early advice can also help identify issues that have nothing to do with care fees but may nevertheless be important to you and your family, such as ensuring your Will reflects your wishes, putting Lasting Powers of Attorney in place or reviewing how property and other assets are owned. 

How can RLK Solicitors help me? 

If you are considering your estate planning or are concerned about how future care costs may affect your assets, taking legal advice at an early stage can help you understand your options. 

This may include reviewing your Will, considering Lasting Powers of Attorney, looking at property ownership and discussing whether trusts or other estate planning structures may be appropriate for your particular circumstances. 

Our approach is tailored to each client. Rather than relying on a one-size-fits-all solution, we can help you understand the potential advantages, disadvantages and implications of the options available to you, so that you can make informed decisions about your family’s future. 

If you are concerned about how future care costs may affect your estate or would like advice on planning for later life, our Estate Planning team can provide tailored legal advice based on your individual circumstances.