There’s no getting around the fact that care home fees can be really expensive, with monthly costs often reaching £3,000 and above.
Often, this causes significant stress for elderly people and their loved ones as they try to work out how to pay for the care home costs - and how long they can afford to pay them for.
Many people logically consider solutions like selling their family home, gifting it to their children, or putting their house in trust to avoid care home fees - but is this allowed?
In this article, Lottie delves into care fees, offering useful tips and advice for those seeking residential or nursing care.
Use our directory to find a care home near you.
Put simply, a trust is something which is legally recognised and can be enforced by a court of law. The rules are often set out in the trust deed and rules. These will dictate how the trust will work.
As a legal entity, a trust will have its own bank account and assets. This means that when its set up, trusts are registered with HMRC.
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.
Care home costs cover a wide range of things, including rent, food, laundry, heating and utility costs. Some care homes also add on further charges and fees for additional services or activities at the home, so always read your contract word for word before signing anything.
|Funding Method||How It Works|
|Self-Funding||The care seeker themselves, or their family and friends, will pay for their own care costs. You will have to self-fund if your total savings and assets are above the capital limits for care - this varies depending on where you live in the UK.|
|Local Authority Funding||The care seeker can only afford to pay for part of their care, so the local authority steps in to make up the rest. In some cases, the local authority will pay for all the care costs.|
|NHS Funding||The NHS will help to cover the costs of care, depending on the results of an eligibility assessment. Funding includes NHS Continuing Healthcare and FNC Funding.|
To work out whether you are eligible for care fee assistance, you will undergo a means test or financial assessment. Means tested assessments are conducted by your local authority and will look at your income, any property you own and capital to work out whether you could be entitled to financial support for care home fees.
Bear in mind that capital limits for care in the UK have different thresholds. If the value of your capital is more than the limit in your country, you will need to self-fund your own care.
Here are the UK saving thresholds for care home fees in 2022/23:
Upper threshold: £23,250
Lower threshold: £14,250
Upper threshold: £28,750
Lower threshold: £18,000
In Scotland, personal and nursing home care is free for those who have been assessed as needing it. Here, you can also claim payments to cover these parts of your care home fees. Other costs like food and accommodation aren’t covered.
Upper threshold: £50,000
Lower threshold: N/A
In Wales, there is only an upper limit. If you have savings and assets worth less than £50,000 then you’ll receive the maximum support from your local authority regardless.
Upper threshold: £23,250
Lower threshold: £14,250
Putting your house in a trust means that a company will take over the ownership of your property and look after it until the point where you move out of it or pass away. At this point, they will deal with passing it on to your beneficiaries or selling it and giving them the proceeds.
As your home, or property, counts towards your financial assessment, you may be wondering whether you can put your house in trust to avoid paying care fees.
The three main types of Trusts that people use to protect their property are Protective Property Trusts, Life Interest Trusts and Interest in Possession Trusts. You can also use equity release if you own your own home. Equity release allows you to take money out of your house and use it towards your care home costs.
If you’re looking at going down this route, 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, often without any guaranteed prospects. In fact, depending on the value of the property there could even be unintended tax consequences involved.
There are many different types of trusts that you can use. The most common types are:
|Type of Trust||How This Works|
|Life Interest Trust||This allows you to allocate a beneficiary (normally yourself and/or a spouse, partner or family members) who then has the legal right to receive income from or use a property named in the trust|
|Interest in Possessions Trust||This is a kind of trust fund that’s set up to entitle the beneficiary to any income as soon as it’s produced. These are very similar to Life Interest Trusts.|
|Protective Property Trust||These allow you to save a portion of your property to pass onto loved ones and are also known as property trust wills.|
Essentially, Trust schemes work by allowing you to gift ownership of your home during your lifetime into a trust. You will appoint trustees - usually children or blood relatives - and write a letter of wishes to dictate 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.
Although this sounds good on a surface level, it is vital to understand exactly what these schemes involve and what would happen if you were to go into residential care.
People are allowed to use the money they have saved as they wish - and if they want to leave gifts to next of kin and other relatives and friends, they’re free to do so.
However, you have to tread carefully when it comes to putting your house in trust, as local authorities have the power to challenge exemptions from paying care home fees.
For example, if your local authority believes that you put your property in trust specifically to avoid care costs, they have the power to invalidate it. This is known as Deliberate Deprivation of Assets. 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).
Before entering any scheme or making any significant decision about your finances, you should seek professional legal advice first. There are so many factors to take into consideration that it can quickly get confusing, so asking an experienced solicitor who is an expert in assets or estate planning will ensure you aren’t led astray.
Your solicitor will give you advice supported by a written report - and you should be given sufficient time to decide whether you want to proceed.
Although trust schemes may seem attractive, you shouldn’t put all your eggs in one basket. Remember that if a scheme guarantees to protect your home from care fees, sadly it’s often too good to be true.
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.
Further, in the unlucky event that your children go bankrupt, get divorced or die, your house is part of their assets, not yours. Bear this in mind when considering giving away the ownership of your home to someone else.
If you are 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 enable you to remain in your own home indefinitely before deciding what your next step will be.
The trouble with trust schemes is that if you put your property in trust, then go into a residential care home or a nursing home, your home is no longer owned by you - it is not part of your capital and cannot therefore be used to fund your care home fees.
So, when it comes to putting a house in trust to avoid paying care fees, the best bet is to proceed with caution. Carefully weigh up all your options, seek professional advice and take the time to come to the decision that’s right for you.