Will I Have to Sell My House to Pay for Care?
As the population ages, more people may need long-term care. One of the most pressing concerns is how to finance this care, especially if it means selling a cherished family home.
Here, we’ll explore the financial assessment process, the impact of owning a home, and potential alternatives to selling your property to pay for care.
Who pays care home fees?
In many cases, individuals who require care in a residential setting are responsible for funding their own care. This means covering the costs associated with accommodation, meals, personal care, and any additional services provided by the care home.
Understanding the means test
Your ability to pay for care will be determined through a means test, which assesses your financial resources, including income and capital. However, the inclusion of your home in this assessment varies depending on your care circumstances:
Home care
If you receive care at home, the value of your home is not included in your financial assessment. This means your contribution towards the cost of home care will be based on other assets and income, not your property.
Short-term or temporary care in a care home
Similarly, if you enter a care home on a short-term or temporary basis, your home will not be included in the means test.
Permanent care in a care home
If you move into a care home permanently, your home may be included in the financial assessment. However, there are important exceptions. Your home will not be counted if:
- Your partner or former partner (unless estranged) lives there.
- A relative who is aged 60 or over lives there.
- A relative who is disabled lives there.
- A child under 18 lives there.
- A carer who has given up their own home to care for you lives there (subject to local authority discretion).
Financial thresholds and contributions
If your capital exceeds £23,250, you will likely have to pay your care fees in full. If your capital is below this threshold, you may receive some assistance from your local council, although you may still need to contribute towards the costs.
Calculating home value
In the means test, the value of your home is assessed based on its current market value. From this amount, any outstanding mortgage or loan is subtracted. Additionally, the value is reduced by 10% to account for potential sale expenses.
For jointly owned properties, the local council will only consider the proportion of the property that you own.
Regional variations in care costs and house prices
Care costs and house prices vary significantly across the UK, impacting how far the value of your home can stretch to cover care fees.
For example, care costs in London are among the highest, but so are house prices, potentially allowing for more extended funding of care from the sale of a property compared to regions with lower house prices.
This table shows the average house prices in 2023 and care home costs for 2024:
| Region | Average price Dec 2023* | Residential Care costs per week** | Average annual cost of residential care** | Nursing care costs per week** | Average annual cost of nursing care** |
| East Midlands | £248,000 | £875 | £45,500 | £1,104 | £57,408 |
| East of England | £342,000 | £953 | £49,556 | £1,181 | £61,412 |
| London | £508,000 | £1,128 | £58,656 | £1,346 | £69,992 |
| North East | £158,000 | £852 | £44,304 | £983 | £51,116 |
| North West | £218,000 | £858 | £44,616 | £1,072 | £55,744 |
| South East | £377,000 | £1,064 | £55,328 | £1,288 | £66,976 |
| South West | £319,000 | £1,042 | £54,184 | £1,265 | £65,780 |
| West Midlands | £253,000 | £1,122 | £58,344 | £995 | £51,740 |
| Yorkshire and the Humber | £208,000 | £867 | £45,084 | £1,075 | £55,900 |
| England | £302,000*** | £970 | £50,440 | £1,196 | £62,192 |
| Scotland | £190,000*** | £1,023 | £53,196 | £1,197 | £62,244 |
| Wales | £214,000*** | £955 | £49,660 | £1,189 | £61,828 |
* https://www.gov.uk/government/news/uk-house-price-index-for-december-2023
** https://lottie.org/fees-funding/care-home-costs/
*** https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/housepriceindex/december2023#
An illustrative example of care costs and home value
Let’s consider an example to understand how the value of a home in the South West could cover care costs.
Scenario
A family in the South West is exploring options for funding long-term care for their elderly relative. They own a home valued at £319,000 and are considering selling it to cover the costs.
Residential Care
With the average yearly cost of residential care in the South West at £54,184, selling their home could provide funding for approximately 5.9 years of residential care.
If they decide to sell their home to cover residential care expenses, they could potentially afford nearly six years of care for their loved one.
Nursing Home Care
Alternatively, if the family opts for nursing home care, which typically comes at a higher cost, with an average yearly expense of £65,780, the sale of their home could fund approximately 4.8 years of nursing home care.
This shorter duration reflects the higher expenses associated with nursing care.
The 12-week property disregard
When moving into a care home permanently, the value of your home is disregarded for the first 12 weeks of your stay. This gives you time to decide on your financial options without the immediate pressure to sell your home.
Are there any alternatives to selling my home?
When facing the costs of long-term care, many people worry about the possibility of having to sell their homes.
Fortunately, there are several alternatives that can help you manage care expenses without immediately parting with your property. Here are some options to consider:
Giving your home away
One potential alternative is transferring ownership of your home to someone else, such as a child or relative.
However, this approach comes with significant risks. Your local council could consider this to be a deprivation of assets, meaning that you have deliberately tried to reduce your wealth to qualify for state assistance, and still charge care fees as if you still owned the home. This strategy requires careful consideration and legal advice to avoid unintended consequences.
Putting your home in a trust
A trust is a legal arrangement in which 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.
There are two types of trust that you may wish to consider – a protective property trust or lifetime trust. Find out more about protecting your property via trusts in our recent article.
Renting your home
Renting out your home can provide a steady income stream to help cover care costs. This option allows you to retain ownership of your property while generating funds. However, it’s important to note that rental income will be included in the means test, potentially affecting your eligibility for local authority support.
Additionally, managing a rental property can be complex, especially if you are also dealing with health and care needs. Professional property management services might be necessary to ensure the rental process runs smoothly.
Equity release
Equity release is a financial product that allows homeowners to access the value tied up in their property without selling it. This could either be a lifetime mortgage or a home reversion plan. Here’s a closer look at each option:
- Lifetime Mortgage
You borrow money against the value of your home, which is repaid when the property is sold, usually after you pass away or move into permanent care. Interest is added to the loan, which can grow over time, potentially reducing the amount left to your heirs.
- Home Reversion Plan
You sell all or a part of your home to a reversion company in exchange for either a lump sum or regular payments. You retain the right to live in your home rent-free for the rest of your life, but the company owns a share of your property, which will be sold after your death.
While equity release can provide necessary funds, it also has significant implications. The value of your estate will be reduced, affecting the inheritance you leave behind. Interest rates and fees can be high, and the total amount repayable may be much more than the initial amount borrowed.
Consulting with a financial advisor is crucial to fully understand the terms and long-term impact of equity release products.
Deferred Payment Agreements (DPA)
Another viable option is entering into a deferred payment agreement (DPA) with your local council. Under a DPA, the council pays your care home fees on your behalf, and you repay the amount either when you sell your home or from your estate after your death.
This arrangement allows you to defer the costs of care and avoid selling your home immediately. To qualify, you must meet certain criteria, and there may be setup fees and interest charges involved.
Using savings and investments
If you have savings, investments, or other financial assets, these can be used to cover care costs without involving your home.
This option depends on the availability and liquidity of these assets and may require careful financial planning to ensure your resources are used effectively and sustainably.
Exploring benefits and grants
You may be eligible for various benefits and grants that can help with care costs. For example, Attendance Allowance or Personal Independence Payment (PIP) can provide additional income if you need help with personal care due to a disability. These benefits are not means-tested and can be used alongside other financial resources to cover care expenses.
Family support
In some cases, family members could contribute towards care costs. This can be an informal arrangement where family members provide financial support, or more formal agreements can be made. Open communication and clear agreements are essential to ensure everyone involved understands their commitments and responsibilities.
Downsizing
Downsizing to a smaller, more manageable property can free up capital that can be used to pay for care. This option allows you to maintain homeownership while potentially reducing living expenses and generating funds for care needs. It also offers an opportunity to move to a property that better suits your changing needs, such as a single-level home or one with accessibility features.
Future reforms and current challenges
Although reforms have been proposed to cap lifetime care costs and raise the threshold for receiving support, the Government has postponed these until at least autumn 2025, after the next election.
The key aspects of the proposed changes are:
- Lifetime Care Spending Cap
An £86,000 ceiling would be introduced on how much an individual has to spend on care during their lifetime. However, this cap would be based on some, but not all, of their private contributions rather than on the total costs of care. - Increased Support Threshold
The threshold for starting to receive support from local authorities would be raised from £23,250 to £100,000. This means more people with higher levels of savings and assets would qualify for some assistance with their care costs.
If implemented, these reforms could alleviate some of the financial burdens associated with long-term care. By capping the total amount individuals need to spend, the reforms aim to provide greater financial certainty and protection for those needing care.
What’s the verdict?
We all want to enjoy the savings we’ve worked hard for and make sure our loved ones are well taken care of. However, the reality of paying for care might be something we need to face.
The best approach is to plan ahead and manage your assets well before the need for care arises. Navigating this area can be complex, so seeking expert legal advice is a smart move.
Professionals can help you understand your options and make informed decisions, ensuring your finances are protected and your family is secure. Taking these steps now can save a lot of stress in the future.
How ELM Legal Services can help
Navigating the complexities of paying for care and protecting your assets can be daunting. ELM Legal Services specialises in estate planning and can provide expert advice on managing your property and finances to ensure you receive the care you need without unnecessary financial stress.
By understanding the financial assessment process and exploring all available options, you can make informed decisions about your care and property, ensuring that your needs are met while protecting your assets.
Our experts offer tailored advice to help you safeguard your assets and plan for the future. Contact ELM Legal Services today to learn how we can support you and your family during this important time.
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.
