How to Navigate Care Home Fees Whilst Ensuring the Protection of your Property
The cost of care home fees in the UK has been steadily rising, presenting a significant financial challenge for many individuals and families.
According to recent reports from the BBC, soaring expenses have become a pressing concern, especially in the face of the current cost of living crisis.
In this guide, we will explore strategies to reduce the burden of care home fees, including trust and estate planning, to help safeguard your property for the benefit of your loved ones.
How much are care home fees in the UK?
According to Carehome.co.uk, the average weekly cost in the UK of living in a residential care home is £760, giving a monthly cost of around £3,290 and an annual cost of £39,480.
However, care home prices vary widely across the UK, meaning that the costs are even higher in some areas.
Specialist care, such as for dementia, can push fees up further still.
Why are care home expenses escalating?
Research conducted by Laing Buisson has shown that the average cost of UK residential care homes increased by 19% from 2021-22 to 2022-23.
This sharp rise in costs is largely the result of rising energy and staffing costs, plus high levels of inflation pushing up the costs of everyday expenses.
There is also an increased pressure from the UK’s ageing population. As the number of elderly individuals requiring care increases, care homes must expand their services and resources, putting further strain on running costs.
Do I have to pay care home fees?
The Care Act 2014 sets out the national guidelines for paying for care home fees in the UK.
After assessing your care needs, your local authority will carry out a financial assessment to determine how much you should contribute to your care fees.
What happens during a financial assessment for care fees?
A financial assessment officer from your local authority will ask about your:
- Earnings
- Pensions
- Benefits (including Attendance Allowance or PIP)
- Savings
- Property (including overseas property)
They do not take the value of your possessions or any life insurance policies into account.
How much money can I have before I have to pay for a care home?
The amount you contribute to your care depends on your location within the UK:
England
- For assets below £14,250 your local authority may cover the cost of basic care.
- For assets between £14,250 and 23,250, you will have to pay for some of the care home expenses on a sliding scale.
- If you have assets over £23,250, you are designated as a self-funder and responsible for full care costs.
Wales
- For capital under £50,000, you can receive fully funded care from the local authority.
Northern Ireland
- Follows a threshold similar to England for care and care home fees, set at £23,250.
- If your total assets are below £14,250, your local authority may cover the costs of basic care.
If your savings or income falls below the threshold, the local authority should begin contributing to some or all of your care.
You have the option to request a review by the local authority while in residential care if your savings dip below the threshold.
As a self-funder, you might be eligible for some assistance in paying for your care home fees, such as:
- Attendance Allowance
- Personal Independence Payment
- Carer’s allowance (if you have a Carer)
If uncertain about your situation, consult with a financial advisor for personalised advice.
Is there a limit on care home expenses?
At present, there is no maximum limit on care home fees in the UK.
However, the UK Government has announced that starting from October 2025, individuals in England will not have to exceed £86,000 in lifetime care costs.
Once this cap is reached, ongoing care expenses will be covered by the local authority.
The intention behind this cap is to prevent homeowners from selling their houses to fund their care.
However, everyday living expenses at a care home, including accommodation, food, and energy bills, will not be included.
According to the proposed scheme, if your capital falls between £20,000 and £100,000, you will contribute to your social care costs on a sliding scale.
What are the options when it comes to financing care in the UK?
1. Free NHS care and contributions
The NHS provides certain free care services, such as medical treatments and some personal care.
However, individuals may need to contribute to accommodation and additional services.
2. Registered nursing care contribution
This contribution is available for those requiring nursing care.
It is a flat-rate contribution paid directly to the care home to cover the cost of nursing care provided by registered nurses.
3. Income and state benefits
Income from pensions, investments, and state benefits can contribute to covering care home expenses.
Understanding the intricacies of these income sources is crucial for financial planning.
4. Private Care
Private care involves paying for care services directly.
It offers more flexibility and potentially higher-quality services, but individuals must bear the full cost.
Could my family look after me instead?
While being cared for by your family might seem like an ideal option, there may be limitations.
These can include time constraints due to work commitments, geographical distance, and varying caregiving skills.
Can I be forced to pay for my parents’ care?
Adult children are not automatically obligated to pay for a parent’s care.
However, if the parent cannot afford the care, local authorities might assess the financial situation of family members to determine if they can contribute.
This is usually done through a means test, considering the adult children’s ability to pay.
How can I protect my property from care fees?
Planning is crucial to prevent the forced sale of your property to cover future care home fees.
Various options are available to safeguard your property, including:
1. Exploring Payment Options
- Care annuity: An insurance policy designed for long-term care expenses.
- Deferred payment schemes: Flexible options offered by local authorities for long-term care payments, with the costs recovered from your estate after your death.
- Equity release: Releasing home equity to cover care fees. You should seek professional financial advice due to the associated risks.
- Rental income: Renting out your property as an alternative to selling, provided it generates sufficient income for residential care costs
2. Financial Gifts
Giving financial gifts to your children may be tempting, but requires caution to avoid being deemed a ‘Deliberate Deprivation of Assets’.
If local authorities identify deliberate deprivation, they may treat you as if you still own the asset, impacting financial assistance.
Exceptions may apply if the disposal happened when you were healthy and couldn’t have anticipated care needs.
Be cautious if you’ve gifted assets, spent substantial amounts before the care needs assessment takes place, or sold assets below market value.
You may have heard of the “7-year rule” that exempts assets from care home fee assessments. This is a myth – it relates to inheritance tax, not care fees.
Local authorities can scrutinise financial transactions at any time, and deliberate asset transfers may still be considered in the means test.
While there are no specific limits, the acceptability of large financial gifts depends on factors like age, health, and the prospect of needing care in the near future.
3. Trusts
Trusts can shield your property from potential care home fees, preserving a substantial inheritance for your family.
A Trust is a legal arrangement wherein assets, such as property, are placed under the care of a trustee for the benefit of named beneficiaries.
Assets held within the Trust will not be considered as part of any financial assessment for care, as long as the council does not believe you have set up the Trust specifically to avoid care fees.
Can I put my property in a Trust?
Placing your property within either a Protective Property Trust or Lifetime Trust can provide greater control over care home fees.
Anyone can set up a Trust, although we strongly advise doing so with a legal professional to ensure it is valid.
We explore both types of Trust in more detail below.
Protective Property Trusts
A Protective Property Trust is a type of Will Trust that adds an extra layer of control within your Will.
This type of Trust comes into effect when you pass away.
Typically, a couple will own their home as Joint Tenants, meaning the property will pass entirely to the survivor.
Whilst this may seem like a comforting position, it does carry some risks.
For example, if the survivor requires long-term care, the whole house may be taken into consideration as part of the financial assessment.
An alternative way that a couple may own a property is known as Tenants in Common, whereby each person owns half of the property.
This enables you to leave your share of the property within a Property Protection Trust, without adversely affecting the surviving partner.
While half of the property is protected from financial assessment within the Trust, the surviving partner retains the right to use their designated share.
This ensures that they can continue residing in the property without compromise.
Find out more about setting up a Property Protection Trust.
Lifetime Trusts
A Lifetime Trust is a legal arrangement where trustees are made responsible for property or assets on behalf of your beneficiaries (usually your partner and/or children).
It is implemented during your lifetime to preserve your wealth and safeguard your family home, ensuring your loved ones receive the maximum benefit from your estate.
You retain full control of the assets while you are alive and have mental capacity, before they are passed on to your chosen beneficiaries upon death.
You are no longer classed as owning assets held within the Trust, which means they won’t be taken into account in any financial assessment for care fees.
As a result, setting up a Lifetime Trust can:
- Allow you to continue to use and enjoy the assets in the Trust for the rest of your life, without being considered the owner.
- Protect the assets put into the Trust for those you wish to leave them to.
Find out more about setting up a Lifetime Trust
In summary
By carefully considering the options available and seeking professional legal advice, you can navigate the complexities of care fees and ensure a secure future for your property and loved ones.
Get in touch
Our dedicated team has extensive experience in Trusts & Estate Management to safeguard your assets and secure your family’s future.
Because everyone’s circumstances are different, we offer no-obligation enquiries, ensuring you get a personalised service that meets your specific needs.
To find out more about your options, call us now on 0117 952 0698 or make a free enquiry and our team will be in touch.
