Worried about care home fees?
Are you concerned about care home fees: wondering who will pay for them or if you will have to sell your home? Look no further – we will answer all of your questions.
Whether you have to pay for your care home fees depends on your finances, property and healthcare needs, and you may be able to get help from your local authority. A financial assessment called a means test will let you know if you qualify.
If your capital is over £23,250, your home may be at risk of being sold to pay for your fees. However, it may be disregarded from the means test for several reasons, and if you own property jointly, this will be taken into account.
You must not act solely to avoid care costs, as your local authority may consider this ‘deliberate deprivation’ and make you pay them anyway. Many commonly-used methods like giving away a home can help with fees, but may put you at risk of a local authority challenge. Payment plans or deferred fees may help with cash flow, but ultimately, you will still be paying the fees.
Trusts can prevent your property from being used to pay for care home fees, provided they are set up correctly. We offer Family Protection Trusts and Property Protection Trusts at Severn Estate Planning.
Talk to us today if you need advice about protecting your property from care home fees.
How much are care home fees?
In 2017, people in the West Midlands spent on average £573 a week on care home fees, rising to £837 a week if they needed nursing care. The cost varies across the country and is inevitably higher in London and the South East. The average for the first year is approximately £31,000, or £44,000 with nursing fees, so it is understandable that most people worry about paying for care. The overall cost can easily reach six figures.
Do I have to pay for my care home fees?
Whether you need to pay for your care home fees largely depends on your income, capital, and owning your own home.
You can request a free care needs assessment from your local authority to find out if you’re entitled to funding support. This includes a financial assessment called a means test. It measures your eligible income and capital – including savings and property. This means test determines how much the council must contribute, and what you must pay yourself.
|Your capital||What you have to pay|
|Under £14,250||None of your care home fees (the local authority will pay them and your capital will be ignored by the means test – but they will still look at your income)|
|Between £14,250 and £23,250||Some of your care home fees (the local authority must pay the rest)|
|Over £23,250||All of your care home fees (also known as self-funding)|
You may qualify for funding if you have significant healthcare needs – the NHS may contribute towards your fees, or pay them all.
If you have any questions about your care provider or your rights, contact the Care Quality Commission. They are the independent regulator of health and social care in England.
Will I have to sell my home to pay for my care fees?
If your capital is over £23,250 – as it likely will be if you own your home – selling your property to pay for care home fees is a genuine risk. However, there are many ways of dealing with this. Likewise, there are also many exceptions to an immediate threat of sale.
Your home may be disregarded from the means test if:
You are arranging care at home
You live with a partner, child or relative who is disabled
Your care home stay is temporary
If the property is the only home of someone who gave up their home to care for you. This situation is a ‘discretionary property disregard’ and also applies to other circumstances – as long as you are not deliberately avoiding paying your fees
If you move into a care home permanently, the council can’t include your property in your means test for 12 weeks – this is known as a 12-week property disregard. This provides you the time you need to decide, or prepare, to sell.
What if I own property jointly?
If you own a home with someone else, the means test must take this into account. Only your beneficial interest – if you will benefit financially from the sale – can be included.
You might have beneficial interest if, for example:
You contributed to the mortgage or purchase price
You gave someone money to buy their home through a ‘right to buy’ scheme
You paid for repairs to a property
The lower your beneficial interest, the less you have to pay towards the fees.
If your partner is going into care and you still want to live in your home, you don’t need to worry. Your local authority can’t include capital or income belonging to you in the means test for your partner. This is because it can’t assess couples on their joint resources and must treat each person individually. Jointly owned property as a whole is disregarded from the test for as long as you remain living in it.
Property is commonly owned as Joint Tenants. In this situation, there is one legal ownership that is shared and one partner’s share is not protected from the care costs of the other. It is much better to hold property as Tenants in Common; there are two separate ownerships and one partner’s costs can’t be recovered from the other’s share. It is easy to change from Joint Tenants to Tenants in Common – this is known as Severance of Tenancy.
Beware of acting for the sole reason of avoiding care costs. The local authority may see some methods as ‘deliberate deprivation’, especially if you are about to go into – or are in – care and they may still claim the fees. Your age and health at the time of taking action can also impact on the likelihood of a challenge.
Methods people commonly use
There are many methods widely used to try and deal with care home fees, which may not protect your home or finances.
A deferred payment is an arrangement with a local authority which allows someone to use the value of their home to pay for care fees. They pay them on your behalf and you repay them when your home is sold. This means you don’t have to sell it immediately, so you have breathing space to sell at a time convenient to you. Or, the arrangement could last until you die, at which point the costs would be paid from your estate.
You may be eligible if:
Your capital (not including your property value) is less than £23,250
You own your home or have another asset that could be used as security
No-one else lives in the property who must stay there, e.g. children
You will remain in a care home for the long-term
It is important to note that although deferred payments help you pay your fees, your home is at risk. This is something you may have to consider if you don’t take precautions for care home fees, and it may mean your children and grandchildren do not receive their inheritance.
Giving away your home
You might think that giving away your home – to your children, for example – will ensure it isn’t used to pay for your care home fees. However, this may cause issues with Inheritance Tax (IHT). You can usually avoid IHT on passing on your home before you die, but you typically have to move out or pay rent and live a further seven years. Otherwise, it could become a taxable gift and your family could potentially have to pay out a large sum.
Also, you could lose your home completely due to financial or marital problems of the children you gift it to. For example, if they develop a gambling problem, or they divorce and their partner is entitled to half the property’s value.
Giving away your home to family or friends may be viewed as ‘deliberate deprivation’ if you are about to go into care. This may cause the fees to still be claimed. If you give it away as a healthy adult many years before you need care, it is unlikely to be viewed as such.
A care fees payment plan or long-term care bond could cover your fees. The main investment product designed for this is an Immediate Care Plan. This is an insurance policy which pays a regular income towards care costs for the rest of your life, in return for a set premium.
If the plan income is paid directly to the care home, it is tax-free. However, it can’t be cancelled, may not cover the costs if your needs change and can affect your entitlement to means-tested benefits.
This method means you are still paying for your fees, but you are just organising the payments in advance.
How to protect your home
If none of the exclusions apply to you, there are methods of protecting your home.
A Trust can avoid you paying these fees if you arrange one before you need care. There are two types of Trust which can help protect your property from care home fees.
A Family Protection Trust offers the most protection. If you arrange one with your partner, you both put your shares of your home into the Trust and, if one or both of you require care, the authority can’t take either share to pay for your fees. This type of Trust comes into effect while both partners are still alive.
A Property Protection Trust only takes effect upon death – after one or both deaths in a couple. But, part of setting up the Trust includes changing joint property ownership into Tenants in Common – called Severance of Tenancy – so each partner can leave a specified share of the property to the Trust, not each other. Even before the death of either partner, only one half of the home – that of the partner needing care – can then be taken by the local authority to pay for care costs.
It can also prevent one partner’s half of the home’s value being used to pay for the other partner’s care fees, after the first partner has passed away. When the first partner dies, their half is held in Trust. If the surviving partner then needs care, only their half is claimed – so the first partner’s inheritance passes on correctly.
Plus, Trusts give you flexibility concerning your care home fees. If you want to pay them, you can. And, as they are discretionary Trusts, you can’t be forced to pay if you don’t want to.
It is important to remember that you can’t set up a Trust just to avoid care home costs. If you put your property in a Trust before requiring care and for a valid reason – such as preventing the delays and expenses of probate – then it can offer you essential financial security. This is because your share in your home is owned by the Trust and so doesn’t count as part of your capital. If avoiding care fees is the primary reason for setting up the Trust, this could be seen as deliberate deprivation and the local authority could claim the fees anyway.
How we can help
Severn Estate Planning can advise you about care home fees and help you choose the right option to deal with them. Our Family Protection Trusts and Property Protection Trusts can offer protection against your home being used to pay for your fees, and are a brilliant way to secure an inheritance for your loved ones or defend your assets.
Contact one of our team today.