Can You Put a House in a Trust to Avoid Care Home Fees?
Estimated Reading Time: 7 minutes
The annual cost of care in a care home can be expensive, especially if you're receiving 24/7 nursing care. There are, however, some alternatives to consider when paying for care, including selling your assets.
Some people may consider putting their house in a trust to avoid care home fees - but is this allowed?
Kickstart your care search
Discover the best care homes in your area through Lottie.
In this article:
- What is a trust?
- What does it mean to put your house in a trust?
- How does a trust work?
- What types of trust can be used to pass on your property?
- Can putting your house in a trust help you avoid care home fees?
- What happens if you go into care when your house is in a trust?
- When to consult a solicitor
- Other considerations
What is a Trust?
A trust is a way of managing your assets. An asset could be money, an investment, a building or something else. A trust is legally recognised and can be enforced by a court of law.
The rules explaining how a trust will work are usually laid out in the trust deed and rules.
A trust will also have its own bank account and assets, meaning it will be registered with HMRC once set up.
A trust will have a set of trustees who are responsible for looking after the rules of the trust. Usually, the children of an elderly loved one are named as the trustees.
What Does It Mean To Put Your House In a Trust?
Putting your house in a trust means that a company will take over the ownership of your property until the point where you move out of it or pass away. At this point, they’ll deal with passing ownership of your property to your beneficiaries (such as family members) or oversee the sale of your property on behalf of your beneficiaries.
As your family home or property counts towards your financial assessment for care fees, you may be wondering whether you can put your house in a trust to avoid paying care fees.
If you’re considering this, it’s really important to do your research and make sure you completely understand the process.
Some trust companies charge large sums of money to set up a trust and transfer a property to the trustees.
An alternative to putting your property into a trust is releasing equity from your home. Equity release allows you to take money out of your house and use it towards your care home costs.
How Does a Trust Work?
By opening a trust scheme, you can place different assets into the trust during your lifetime, such as your home. Anything placed in the trust will benefit another person or group of people (the beneficiaries). These beneficiaries could be your children or other relatives.
You’ll write a letter of wishes to explain what you want to be done with the sale proceeds and what will happen in the event of your death.
This trust gives you the legal right to live in your property rent-free, but when you no longer want to live there, your home can then be sold and your trustees deal with the money from the house sale.
What Types of Trusts Can Be Used To Pass On Your Property?
The three main types of trusts that people use to protect their property are usually:
|Type of Trust
|How This Works
|Life Interest Trust
|You choose a beneficiary (you and/or somebody else) who receives income from the property in the trust.
|Interest in Possessions Trust
|The beneficiary can claim any income as it’s generated.
|Protective Property Trust
|Also known as a ‘Property Trust Will’, this allows you to keep a portion of your property, which can then be passed onto your loved ones.
Can Putting Your House in a Trust Help You Avoid Care Home Fees?
You can use the money you've built up in your trust however you wish - and if you want to leave gifts to next of kin and other relatives and friends, you’re free to do so.
However, you have to be careful when it comes to putting your house in trust, as local authorities have the power to challenge exemptions from paying care home fees.
Local authorities are often suspicious of properties which are transferred into a trust. If your local authority believes that you put your property in a trust specifically to avoid care costs - a deliberate deprivation of assets - they have the power to invalidate it. In this case, your local authority will treat you as if you still own the asset you gifted or the money you spent (also known as notional capital).
What Happens If You Go Into Care When Your House is in a Trust?
If you put your home in a trust and then go into a residential care home or nursing care home, you’ll no longer own your home.
It wouldn’t be classed as an asset you own during a financial assessment, so it can’t be used to pay for your care home fees.
There’s no guarantee using a trust scheme will mean your property is exempt during a financial assessment. If your local council believes you put your property into trust to avoid care home fees, they may say you’re still responsible for paying for your own care fees.
When it comes to putting a house in trust to avoid care fees, you must proceed with caution. Carefully weigh up all your options, seek professional advice and take the time to find a decision that’s right for you.
When To Consult a Solicitor
Before entering a deferred payment agreement or making any significant decisions about your finances, we strongly recommend you first seek professional legal advice. This should be from a Trust Specialist, such as a solicitor.
Putting your house into a trust is a complicated topic, so asking an experienced solicitor who is an expert in assets or estate planning will ensure you make the correct decision. They’ll also make sure the trust is valid and you aren’t doing anything to simply deprive yourself of assets.
Once you’ve spoken to a solicitor or another legal expert, you can then make an informed decision on how best to proceed.
There are also risks involved with the deprivation of assets. For example, if you fall out with your children, you essentially have no say over what happens to your home and your children can sell your house without your permission.
If you’re starting to need more care and support, putting your home into a trust or selling it to go into a care home is not the only option. You could first look at getting domiciliary care or home care, which will allow you to continue living in your own home indefinitely before deciding what your next step will be.
Lottie matches care seekers with the best care homes for their needs. You can request a free care home shortlist from our care experts, who will share homes matching your budget, location and type of care needed. You can also search for a care home through our easy-to-use directory.
Frequently Asked Questions
Does a will protect assets from nursing home fees?
Yes, you can use a will to protect some of your assets when entering a care home such as a nursing home. This can be done using specific trust structures within your will.
However, this is a complicated process, so it shouldn’t be attempted without first seeking advice from a will-writing specialist.
What are the disadvantages of putting your house in a trust?
There are a few potential disadvantages to putting your home in a trust, such as the various costs (including administrative and legal fees) and that it can be a complicated process. You’ll also lose ownership of your home, and it will be managed by your chosen trustees.
Free Care Fees & Funding Email Course
Written by our team of experts and designed to help families fund later life care in England.