As you get older, the possibility of needing additional care and support will become more likely. There are several forms of care and assistance available including home care, sheltered accommodation, care homes and nursing homes.
One of the most common concerns, is how much of your estate will be taken to pay for care homes and how much will you leave for loved ones to inherit. That’s why it is important to plan ways to finance any future care fees as early as possible.
In this article we cover care home fees and gifting property to family members.
It is understandable that many people would like to look at ways to protect their hard-earned assets as much as possible in order to pass these on to children, grandchildren or other loved ones.
Who pays for care home fees?
Following a care needs assessment, the local authority will carry out a financial means test to determine your contribution to your care. Within each category of care and assistance, the costs will vary considerably and will be dependent on the area in which you live.
You are expected to pay either all or part of the costs towards your care, depending on your needs and the type of care you require.
Should you need to go into residential care permanently, you will have to sell your property unless it is occupied by a member or ex-member of your family (that includes former partners, unless they are estranged from you). Your property will be assessed on its current market value less any loans on it and minus 10% for selling expenses.
How much of my assets are used for care home fees?
In England, the threshold for savings that do not have to be used for care fees is £23,250. If your estate is valued over £23,250, then your assets will be used to pay for care. Any property you own is included in the value of your assets, so this may need to be sold to cover the fees.
How much you need to pay and your eligibility for local authority funding is quite complex so you should seek further advice over what fees are payable as much of it is dependent on your particular circumstances.
More information can be found here
Can I gift my house to my children?
Many people think that the answer to how to protect your home from care fees is to gift it to children or other loved ones. However, you cannot do this to avoid paying care fees as this is known as ‘deprivation of assets’ – deliberately reducing your capital by gifting. This could include:
– Gifting away property or assets
– Deliberately selling an asset for less than it’s worth
– Spending large amounts of money prior to a care needs assessment
It is highly likely that a local authority would decide that you have deliberately reduced your capital to avoid care fees and take action to recover their costs which can put both the person and the person gifted into a bad financial situation.
Can I make other gifts?
Although any obvious gifting can be seen as a deliberate deprivation of assets, you can gift smaller amounts of money whilst you are still young and healthy enough that it is unlikely you will need care in the near future.
You may wish to make regular (annual) smaller gifts whilst you can. You need to be aware however, that there is no official cut-off for the time prior to needing care that this would be acceptable.
What is the best way to protect my home from being sold to pay for care fees?
The best way to avoid your home being used for care fees is to seek legal advice as early as possible. A qualified solicitor will be able to talk you through the options available. This can include preparing a Trust Will and changing the way you own your property.
By taking steps early on to plan for your future, you can reduce your liability for care home fees. You can provide financial security for your loved ones and protect your assets for the next generation. For more information see inheritance tax planning and trusts.