A jointly owned property can complicate the process of selling or relinquishing ownership of the property. Problems may arise when one of the occupants needs to move into a care home. Some may need to sell the home in order to pay for care home fees, whereas others may be able to keep it.
In this article we will look at how care home fees are calculated and what can happen with jointly owned property and care home fees in different scenarios.
Use our directory to find a care home near you.
Depending on the value of your estate, you may receive no funding, partial funding or full funding from your local authority to cover the cost of your care home fees. This is determined by a means test carried out to establish how much funding you are eligible for.
The means test will assess your total capital, which may include a jointly owned home of which you are one of the owners.
If you require serious long-term medical assistance, you can be deemed eligible to receive NHS funding, which does not require a means test.
Your local authority is responsible for conducting the means test (a financial assessment) that determines the amount of funding you are eligible for.
To establish the funding you can receive, they will add up your assets, savings, investments, income and any other capital you possess.
Based on the total amount, you will be eligible for different levels of funding. The thresholds differ in different countries across the UK.
You must self-fund your care home fees if your total capital is above the following limits:
You can receive full funding from your local authority if your total capital is below:
You may receive partial funding if your total capital is between:
If your partner still lives in the jointly owned property, it won’t be included in the means test. If you are separated or divorced,however, it will be included, provided they do not care for your child (under 18 years old) or for an elderly relative (aged over 60). The person they care for must also live in the property.
If you are only going into a care home temporarily, the property will not be included in the means test. It will also not be included if you are being means tested to receive home care.
If you have separated from your partner and live apart, but bought the house together, half the value of the property will be included in your means test (assuming the mortgage has been fully paid).
For example, a £300,000 property will mean you have £150,000 in assets from the property alone. If you have an unequal share of the property (e.g. owning less or more than half of the property), this can be considered in the means test.
If your property is included in the means test, your local authority must ignore it for a 12week period at the start of your tenancy in a care home. This is to give you time to make a decision on what to do, such as selling it or renting it out.
There are many different things that can happen with your jointly owned property. As we discussed in the Means Test section, the property is not always included in the means test calculation.
If you need money to pay for your care home fees, you may have to sell your property in order to pay.
Alternatively, you can also apply to your local authority for a Deferred Payment Agreement. The local authority will lend you an amount of money (based on the value of your property) to pay for your care home fees. This amount will then be returned to them from the sale of your estate after your death.
You will have to pay administration fees for Deferred Payment Agreements however, and interest will accrue over time. You can speak to your local authority to determine whether you are eligible for this. To be eligible, your assets must be less than the upper means limit.
If you do not need to sell your home to pay your care fees, e.g. if you are receiving funding from your local authority or if you have income that covers the care costs, then there are several options for what you can do with the jointly owned property. For example, your partner can continue living in it, you can rent it out or you can gift it to your children.
What happens to your jointly owned home will depend on your financial situation and the occupants also residing in the property.
If the property is not included in the means test, then your partner is free to continue living there. If it is included however, they may have to move out, depending on the circumstances, as for example you might need to sell the property to pay for self-funded care home fees.
If you apply for a Deferred Payment Agreement and are accepted, your partner can continue living in the property as long as it is not included in the means test.
If your property is included in the means test, there is a 12-week period from when you begin residing in the care home.
Your partner can stay in the property during this period as you may be putting the home on the market or looking to rent it out, but at the end of the 12-week period, your partner may have to leave the property.
If you intend to gift your property to your children (lucky them!), then there are several things to consider.
Signing the deeds of a property over to your children is considered by many to be a good way of avoiding a large amount of inheritance tax as well as avoiding paying for care.
However, it is not so simple. For example, if your property is worth over £325,000, you must survive for seven years after signing it over to your children to ensure it isn’t part of your taxable estate.
You are able to sign the deeds of your property to your children, but your local authority may consider this to be a deliberate deprivation of assets and can still include your property as part of their funding assessment. This means you may have to self-fund your care home fees without having access to your property value anymore.
If you sign the deeds to your property over to your children, but later require money to cover your care home fees, there is no guarantee that your children will be willing to sell the property to provide with you the required money. This could leave you in a sticky situation.
Furthermore, if your children later face bankruptcy or go through a divorce, the property will be an asset taken into consideration and they may lose the property or be forced to sell it to financially cover themselves.
Each person will have their own circumstances, and should carefully consider the best course of action. Always research the best strategy for yourself, to make sure you are set up to receive the care you need and if in doubt seek legal advice.