Long Term Care Planning / Advice
Care Home Fees - How much can you keep before paying for Care and is it possible to avoid selling your house to pay for care?
It can be a shock to many people when they find out that they may have to pay over £35,000 a year for their care home costs. It is therefore only natural for people to consider ways to legally protect their assets from nursing home fees. This may be especially important if you are planning to leave the family home to your children or other beneficiaries.
One of the most regular questions we get asked is how to avoid selling your house to pay for care.
The headline facts about avoiding care home fees
• You cannot deliberately look to avoid paying care fees, for example by gifting away your property or savings, if the prospect of care is on the horizon.
• By purposely giving away your property, such as the family home, there is a risk that it is seen as deliberate deprivation of assets. If you do this, your property may still be assessed when your assets are calculated.
• There are legitimate reasons as to why you can gift your assets without them potentially being used as part of this calculation to see if you have to pay for your care fees. It is possible to transfer your house into a Trust and thus assign your property over to your Trustees, e.g. your children. However, there has to be another reason/s as to why you place your property into a Trust and not just because you don’t want to pay future care fees.
• We strongly recommend that you speak to a Trust specialist, such as Aptus Planning LLP, if you want to consider these options, so you can ensure the trust is valid and will not be seen as simply to depriving yourself of assets.
• If you have assets that take you above the Upper Limit threshold, currently £23,250, it is really important that you speak to an expert and get financial advice about what you can do with your savings and other property or investments to protect them from care fees.
The key to avoiding paying for care home fees and potentially losing the family home is to get professional advice as early as possible.
Some important questions to consider when looking at avoiding care home fees
1 – Can I give away my money and assets to avoid care home fees?
The answer to this is NO - you cannot simply give your property or money away and expect it to be out of reach should you enter Care.
However, there are some circumstances where it may be possible to give away your assets and ensure that they are not included in any calculation to determine the value of your capital when assessing nursing home costs.
As long as all the actions you take are legal and there is a valid reason for the gift, a consequence may be that these gifted assets are disregarded for the calculation of care fees. Effectively this means you avoid paying nursing home costs yourself. However, even in this instance, the local Health Trusts care package may not meet your personal preferences or requirements.
2 – How much can you keep before paying for care and what is the savings threshold for care home fees?
How much can you keep before paying for care depends on where you live in the UK.
• England – £23,250
• Wales – £24,000 for home care or £50,000 for a care home
• Scotland – £28,000
• Northern Ireland – £23,250
If you have savings and assets above this, then it is likely that you will have to pay for your care. If you share your home with a spouse or partner then you will need to consider their circumstances too.
The above saving thresholds include any savings and income, such as a pension. Your property may be counted as capital after 12 weeks if you move into a care home on a long-term basis.
However, it won’t be counted if, say, your spouse or partner still lives there. Once your savings fall below £14,250, only income is considered for a means-assessment.
"Many people do look to put their house into a trust, so they can avoid care fees and pass their home on to their children. However, this is not straightforward and your local Health Trust may look at whether you put your home in trust solely for the reason to avoid your care costs. Thus it is essential to engage the services of a Trust specialist to ensure the planning is valid."
3 – Signing house over to avoid care costs – is this a deliberate deprivation of assets?
As mentioned above, if you purposefully give away your house, money, wealth, capital or property with the aim of ensuring they are not counted towards a financial assessment for care costs, this could be classed as deliberate deprivation of assets. Generally, if you did the transfer a few months before going into care then this is likely to be seen as depriving yourself of your assets.
Your local Health Trust will make an assessment on whether they think you have deliberately given away your assets. If they decide that you have done this with the aim of avoiding paying for your care, they may calculate your fees on the basis that you still own these assets.
However, the decisions made by local Health Trusts can also be challenged.
If you were fit and healthy when you transferred your assets and could not have foreseen the need for care and support at the time, then it is unlikely to be considered as deliberate deprivation of assets.
So to be clear, it IS still possible to put your house into a Family Trust as long as the reason isn’t to solely avoid paying care fees
4 – What counts towards deliberate deprivation of assets?
The act of giving away your money and assets is, in itself, not the only thing that can be assessed. Deliberate attempts to reduce your money or assets could also be included.
For example, this could include:
– Gifting someone your money, both within and outside your family circle.
– Transferring the ownership of your home to someone else in your family, so it’s not included in the financial assessment for care fees.
– Demonstrating unusual spending patterns and spending large sums on things you may not normally buy.
– Buying things, such as jewellery or a car, which might otherwise not be included in a financial assessment for care fees.
5 – How to avoid selling your house to pay for care. Can I sign over my house?
Many people think about “how to avoid selling your house to pay for care” and decide that they will sign over their house to their children.
However, simply signing your house over to your children to avoid care costs won’t be effective, especially if it is done a few months before you go into care. This would, in all likelihood, be seen as deliberate deprivation of your assets.
If the transfer is made a few years before you go into care, then it may indeed work. However, what if one or more of the individuals that you signed the house over to found themselves in financial difficulties or going through a divorce? The house would then form part of their own asset base and thus the house that you live in could be sold from under your feet to pay off creditors or ex-partners! Not a good outcome……
We would recommend you speak to a Trust specialist so that they can tell you whether a transfer of the house into a suitable Trust could work for you.
6 – Can I just dispose of my assets to avoid paying nursing home costs before going into care?
One thing you may hear some recommend is what is formally known as ‘disposal of assets’. Again, this is just another type of deprivation of your assets. This is different from putting your house into a trust to avoid care home fees.
This is where individuals ‘hide’ their money, so it isn’t included in a means tests by their local authority or council.
However, despite what some may say this is never a safe strategy – local Health Trusts are becoming more adept at checking up on and identifying those who are disposing of their assets and thus seeking to avoid paying care home fees.
When disposal of assets is suspected, you will be means-tested using those funds by default – so you won’t gain or benefit anything by attempting to hide them.
7 – What are the risks if I give away my property or assets to protect from nursing home fees?
Giving away your home is something that you need to think carefully about. Many people think that they can protect their assets from nursing home fees by just giving them away.
However by giving away the ownership of your assets, such as your family home, it can leave you financially exposed in other ways.
Examples of this would include:
Bankruptcy – You never know what may happen in the future. If the person you gifted the property to has financial problems or becomes bankrupt, it is possible that the property would be taken to satisfy creditors.
Divorce – If the person who received the gift gets divorced, then your home will make up the value of the estate that needs to be divided on divorce.
Death – If the person who was gifted the property dies before you, then the property will be passed via the wishes set out in their Will. These may not be in line with what you would have wanted.
8 – Putting house in Trust to avoid care home fees – Can I do this?
Sometimes, a less risky approach to avoiding care home fees, and just giving the money and wealth away as a gift, is to put your house into a Trust instead. Whilst on its own a Trust won’t always stop you avoiding care fees, they can potentially be used to mitigate them.
Therefore, whilst it may seem appealing putting property into a Trust to avoid care home fees, it is something you need to be very careful about.
However, that said, there may be other very real reasons as to why you have to put your property into a trust. A consequence of this is that your property may then be excluded from any financial assessment. So, in the right circumstances, it is possible to avoid meeting care fees without it being seen as a deprivation of assets.
Whilst this approach may seem the perfect way to use a Trust to avoid care costs, the reality is that it is far more complex.
With many Health Trusts under financial pressure, they are more proactive in looking for cases where people are using trusts to avoid fees. In these types of cases, they may well challenge the reason behind using a Family Trust. Therefore it is vital that any Trust arrangements are set up legally and correctly to minimise the risk of any such challenge.