How to Protect Your Home from Care Home Fees

Alarmingly, 2 million older adults currently have unmet care or support needs – ranging from difficulty bathing to walking across a room. Additionally, access to long-term publicly funded social care has fallen from 8.2% of older adults in 2003/04 to 3.6% in 2023/24, suggesting the system is struggling to keep pace.

It’s no wonder then that one of the most common questions we hear from clients is:

“How can I protect my home from having to be sold to pay for care home fees?”

For many families, the home is their main asset. The thought of it being sold to fund care costs can be worrying. While there are no guaranteed ways to completely avoid care home fees, there are legal options worth considering – some more effective and safer than others.

When someone enters residential care, the local authority carries out a financial assessment (means test) to determine how much they must contribute towards care costs.

In England, the current thresholds are:

Your home is usually included in this assessment, unless:

With average care home costs ranging from £800 to £1,400 per week for residential care, and even more for nursing care, assets can be depleted quickly without proper planning.

A common misconception is that gifting your home to children or other beneficiaries during your lifetime will stop it from being included in care fee assessments. While this may sound appealing, in practice it carries significant risks:

Once gifted, the property no longer belongs to you, meaning you cannot control what happens to it. You have no legal right to live there and could technically be asked to leave.

If your beneficiary divorces, becomes bankrupt, or passes away, your home could form part of their financial settlement or estate. You could lose the home entirely through circumstances beyond your control.

Local authorities can treat the gift as “deliberate deprivation of assets” if they believe it was done to avoid care fees. If this happens, they will treat you as if you still own the property when assessing your care costs.

There is no time limit on how far back local authorities can look. They will consider:

If the local authority determines deliberate deprivation has occurred, they can still require you to pay care fees based on the value of the gifted asset, even though you no longer own it.

For inheritance tax purposes, if you gift your property but continue to live in it, HMRC may treat this as a “gift with reservation of benefit”. This means the property remains part of your estate for inheritance tax, even after seven years.

Because of these substantial risks, gifting is rarely the safest solution.

For couples, how you own your home makes a significant difference to care fee protection. There are two ways to own property jointly:

This is the most common form of ownership. When one owner dies, the property automatically passes to the surviving owner. It does not form part of your Will.

The problem: If the surviving owner later needs care, the full value of the property is assessed for care fees.

Each owner holds a distinct share (usually 50% each). When one owner dies, their share passes according to their Will, not automatically to the other owner.

The benefit: The deceased’s share can be placed into a trust, protecting that portion from care fee assessments if the surviving owner later needs care.

If you currently own your property as joint tenants, it can be changed to tenants in common through a legal process called “severance of joint tenancy”. This is an essential first step in care fee planning for couples.

A carefully drafted Will can provide that, on the first death of a couple, a share of the property passes into a trust. The surviving spouse or partner can still have the right to live in the home, while the capital value is preserved for your chosen beneficiaries.

How it works:

Example:

Mr and Mrs Smith own a £200,000 home as tenants in common. When Mr Smith dies, his £100,000 share goes into a protective property trust for their children. Mrs Smith continues living in the property.

Five years later, Mrs Smith needs residential care costing £50,000 per year. Only her £100,000 share is assessed for care fees. After two years, when her assessable assets fall below £23,250, she becomes eligible for local authority support.

When Mrs Smith dies, the children inherit the £100,000 from the trust plus what remains of Mrs Smith’s share – significantly more than if no trust had been in place.

This type of Will trust can be structured to allow flexibility – for example, enabling the survivor to downsize or move to a new property – while ensuring that the deceased’s share of the estate is protected for future generations.

Another option is to place your property into a trust during your lifetime. This can provide some protection from care fees while allowing you to retain the right to live in your home.

However, lifetime trusts are more complex and expensive to set up, with costs typically running into thousands of pounds. There may also be tax consequences, as discretionary trusts face higher tax rates than personal assets.

Important considerations:

For many families, using trusts within Wills can offer a more balanced and cost-effective solution.

Some local authorities offer deferred payment agreements. This allows you to defer paying care home fees until your property is sold, usually after your death. Interest is charged, but it means you don’t have to sell your home immediately.

If your primary need is for healthcare rather than social care, you may qualify for NHS Continuing Healthcare funding. This pays for all care costs regardless of your assets. However, eligibility criteria are strict and applications are often refused initially.

Every family’s situation is different, and the right approach will depend on your circumstances. The key points to remember are:

Seeking advice from an experienced solicitor is the best way to ensure your home and assets are protected in a way that works for you and your loved ones. We can guide you through the options available and help you put the right protections in place.

If you’re concerned about protecting your home from care fees, contact our Wills and Probate team for clear, practical advice tailored to your circumstances.