How to avoid care home fees

One of the biggest fears our clients convey to us is the threat of losing their assets (particularly their house) should they end up in long term permanent residential care. Find out how you can protect your assets and learn how to avoid care home fees by following our simple advice. 

Protecting our clients’ assets from the threat of residential care fees is central to our business. One of the single biggest reasons why people initially come to us is to obtain specific advice on how to protect assets from the threat of care home fees. Usually the primary asset will be the family home, and people are constantly approaching us for advice on how this can be best protected from care fees and passed to next generation family members.

We can advise upon the options available to our clients to help to protect their assets from the impact of residential care fees. Simple and inexpensive measures such as creating will trusts can potentially save tens of thousands of pounds from care costs.

How to create a will trust

A simple trust in a married couple’s Will can go a long way to resolving the issue of how to avoid care home fees. It can enable man and wife to each leave their own half of their property not to each other but directly to their children (or other beneficiaries). Alongside this they each also state that their spouse can live in the property for the remainder of their lifetime. This means that the children (or other beneficiaries) do not take actual possession of the property until the couple are both deceased. As a result on first death the survivor will be able to remain in the property as though it was their own, but would only actually own half of it. If the survivor goes into care it will only be their half of the property which would be deemed to belong to them when being assessed for payment of fees!

To make a Will in this way a couple would need to adjust the way they own their property from “joint tenants” to “tenants in common”, something we can easily arrange whilst making their Wills. The distinction between these two types of ownership is very simple. Owning as “joint tenants” means that both parties own the property together and that on first death it will automatically pass to the survivor of them. Owning as “tenants in common” means that each party owns one half of the property independently of the other. As a result their half of the property will form part of their estate on death and thus will be controlled by their Will.

Please also read our page on Lasting Powers of Attorney. These are also products which can give a family a huge amount of control over what goes on during the care process, and how it is to be paid for.

What is deprivation of assets and why do I need to avoid it?

Individuals will often deliberately reduce their assets, such as property, money, and income to avoid care home fees. When/if it comes to paying for care the local authority will do a means test to calculate how much a person should pay towards their own care. However, if somebody has been found to have deliberately deprived themselves of assets , they could be assessed by the local authority as still owning those assets. Numerous questions can end up playing a part in a decision on this issue, but the two most obvious are the length of time which has passed since an individual got rid of an asset, and whether there was a genuine or significant alternative reason for giving away the asset.

Remember, if your local authority think that you have deliberately reduced your assets to avoid care home fees, they may still include the value of those assets when they conduct the means test.

Giving your property away will not protect you from care home fees

Simply giving property away will not protect it from residential care fees. If a person transfers property to another person or sells it to them below the true market value, the local authority can deem this to be deliberate deprivation of assets. They will then treat that person as though they still have ownership of that property. They can still take it into account when assessing people for the payment of care fees. There is no time limit on how far they can look back, although, many people mistakenly confuse this with the seven-year rule which HMRC uses for inheritance tax purposes.

For a man and wife the best time to plan ahead for care fee mitigation is whilst they are both still alive. As discussed above using a straightforward trust in a mirrored Will can dramatically reduce the financial impact care upon their estate.

The local authority must ignore the value of your property if your spouse is still alive and lives in your property. Unfortunately, however, most married couples traditionally leave everything to each other on the first death, meaning that ultimately one of them will be widowed and will own their property outright as the sole surviving owner. From that day on it will be taken into account if residential care becomes necessary, and it’s value can be entirely swallowed up by care costs. (minus the modest threshold allowances referred to above on this page).

The need for long term permanent residential care, and the funding of that care, has become a massive problem for all of us.

Approximately 130,000 people start to require some form of care each year.

One in three women over 65 and one in four men over 65 will eventually need care.

Statistics indicate that almost 10 million Britons (approximately 17% of the population) are expected to live beyond the age of 100.

The average cost of residential care is approximately £30,000 per year.

Currently, anybody with assets (including their house) and are moving into a care home, who have more than £23,250, has to fully fund their own care entirely at full cost. Anybody with over £14,250 has to make contributions to their own care home costs.

At the 1997 Labour Party Conference Tony Blair said: “I don’t want a country where the only way pensioners can get long-term care is by selling their home.” However, since then approximately 20,000 houses per year have been lost, and are currently being lost to fund nursing home fees.

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