Avoiding Care Home Fees
Protect your assets and secure your family’s future with expert estate planning guidance
Protection from Care Home Fees.
With life expectancy increasing and the costs of social care growing dramatically, it is natural to be concerned about what will happen to your savings and assets in the future. Successive governments have encouraged you to save for later life, but then impose measures that deplete your assets drastically should you require social care.
It is only natural to wonder if there are steps that you can take to minimise what is available to be taken should either you or your partner require social care services in the future. We are frequently asked if there are measures that will enable you to pass as much as possible to your family, either through your will or as a lifetime gift, rather than lose those assets to care home fees.
Using trust to protect your assets
It may be possible to protect your assets from future liability to pay care fees by disposing of them during your lifetime, either by giving them to family members or placing them in a trust. However, you should always bear in mind that 1) you should not give away assets if you need to rely upon them yourself, 2) assets given away might still be accounted for towards the costs of any care services if your gift is deemed to be a “deliberate deprivation of assets”, and 3) the tax implications of the lifetime transfer might be onerous.
You can protect your assets from the possibility of being used towards your partner’s care fees, and ensure that your share is passed on to your children, for example, by making them subject to a Life Interest Trust. Instead of providing your assets directly to your partner, you create a Trust that enables your partner to use your assets (such as living in your share of your home) for the rest of their life. After their death, the assets pass to your preferred beneficiaries. The benefit is that your partner can enjoy your assets for as long as they need, without ever actually owning them. If they are required to pay for their own care services in the future, your assets will not be included in the financial assessment; instead, they will be preserved for others.
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How do I protect my half of the Family home?
If you jointly own property with your partner, it is worth considering setting up a life interest to protect your share of that property from being used to pay towards your partner’s care home fees.
If you were to die before your partner, and after your death, they go on to require care services, there is a risk that your share of the property may be accounted for when the local authority makes a financial assessment of your partner’s resources, and even used to pay towards their care.
The solution to this problem is to make sure that you both jointly own your property as “tenants in common” and then provide a “life interest” to your partner.
What is a tenancy in common?
When you co-own property with another person, it will be either as “joint tenants” or as “tenants in common”.
With a joint tenancy, you both own the whole of the property and your “shares” are not divisible. When one of you dies, the other will go on to own the whole property, even if you make a will that states your share should go to others. This is because, after one joint tenant dies, the other acquires the property by right of survivorship. The survivor owns the entire property. It follows that, should the survivor require care services in the future, then the whole of the property will be an asset for the local authority to include in its financial assessment, and the property might have to be sold to pay for care home fees.
With a tenancy in common, you each own an identifiable share of the property. Unless the rules of intestacy provide otherwise, for your partner to inherit your share of the property, you would have to pass it to them in your will. If legal ownership of your share of the property never passes to your partner, then it cannot be included in an assessment of their financial means should they require care services in the future.
More often than not, when people buy a house together, particularly in their early years, they do so as joint tenants. Therefore, it is worth checking whether this is the case with your home. If you wish to protect against the risk that your property will be used to pay your partner’s care home fees, it may be necessary to “sever the joint tenancy”.
What is a life interest trust?
A Life Interest Trust is a legal mechanism that provides a person (known as the “life tenant”) with the right to use the income generated by the assets, or otherwise use the property (such as by living in the house) for the rest of their life, but without providing ownership of the assets to them. When the life tenant dies, ownership of the assets passes to other beneficiaries instead.
For example, you might create a life interest trust out of your share of your home, making your partner the life tenant so they can live in it for the rest of their life, and after their death, your share passes to your children.
How does a life interest trust protect against care home fees?
With these arrangements, the “life tenant” never actually owns the asset; therefore, it cannot be accounted for if they subsequently require social care services.
Your partner could also set up a life interest of their own share, making you the life tenant of their share. Wills can be drafted in mirror image terms to achieve this. With such arrangements, unless both of you require social care services during your lifetimes, then at least 50% of your property will be preserved for your subsequent beneficiaries.
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Why must care fees be paid for, and how much might they be?
The Care Act 2014 imposes an obligation on local authorities to assess a person’s care needs, and where a need is found, to provide for that need. When the local authority provides care services, it may charge the service user for all or part of the costs incurred in providing those services.
In considering whether the service user must pay for that care, or pay a contribution towards that care, the local authority must make a financial assessment of that person’s income and assets, including savings and the home they live in.
Suppose you are subject to a financial assessment in respect of care fees. In that case, the local authority will scrutinise your personal income and the value of the assets that you own, including the value of your home.
When do I have an obligation to pay care fees?
If the value of your assets, including your savings and home, exceeds £23,250, you must pay all the monthly costs of your care services.
If the value of your assets is between £14,250 and £23,250, then you must pay i) a contribution towards the costs of your care from any income that you receive, and ii) a further “tariff contribution” from your savings or assets. The contribution taken from your income (such as your pension, for example) will be as much as you can afford to pay, provided that you are left with an allowance of £30.15 per week. For the tariff contribution, it is assumed that you have an extra £1.00 per week spare to contribute towards your care for every £250 in savings between £14,250 and £23,250 – so if you have savings of £20,000, then you would be deemed to be able to pay an additional £23 per week towards your care.
If the value of your assets falls below £14,250, you must still contribute towards the costs of your care from any income that you receive.
Whilst the original rules of the Care Act 2014 provided for a cap on the amount of care fees an individual may have to pay, the current government has removed that cap.
When does the NHS pay for care
Where your health condition is considered to be a “primary health need”, as opposed to a “social need”, the NHS will fund the care that you require. NHS-funded care is not means-tested, and your assets are not taken into account. Unfortunately, legal rules do not define what constitutes a “primary health need” for these purposes, and the term is open to subjective interpretation. The determination as to whether you have a “primary health need” is said not to be diagnosis-led, and it therefore follows that you being diagnosed with any particular health condition will not mean that you automatically receive NHS funding for your care needs. There are discrepancies and contradictions between various local authorities, and in reality, you may find that NHS funding is only really made available in the most extreme of cases. In practice, this increases the likelihood that you may have to pay for or contribute towards your own care.
How much might care fees be?
The average cost of receiving care services at your own home is in the region of £25 to £30 per hour. According to the NHS website, the average cost of a residential care home in the UK is £600 per week, and the average cost of a nursing home is £800 per week. This puts the average cost between £31,200 and £41,600 per annum, with many care homes charging much more.
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What is a deprivation of assets?
A deprivation of assets in the context of this page is the deliberate disposal of your assets, such as by giving them away, paying them into trust, or even wasting them on a spending spree, with the aim of making those assets unavailable to be used towards care home fees. It is the deliberate reduction of the value of your estate to gain an indirect financial benefit – by not having to contribute towards care expenses. It does not matter whether this was the sole motive or one of several genuine reasons; the fact that one of the motives was to avoid care fees will cause the whole gift or transfer to be considered a deprivation of assets.
If a local authority, performing a financial assessment for social care payments, considers that you have deliberately deprived yourself of assets, it will assess the value of your estate on the basis that those assets are still available. This may result in a requirement to pay your own care costs, even though you no longer have the assets to use.
Creating a life interest trust in your will in respect of your share of your property will not be considered a deliberate deprivation of assets.
What might be considered a deliberate deprivation of assets?
Giving your property away in life, or paying it into a trust for your or someone else’s benefit whilst you are still alive, might be considered a deliberate deprivation of assets.
Whether such a lifetime transfer is considered a deliberate deprivation of assets depends upon the context in which the payment was made. The more likely it is that you considered there to be a possibility that you might require social care in the future, the more likely a payment will be regarded as a deliberate deprivation of assets.
However, where gifts or transfers are clearly made for other reasons, they ought not to be considered a deliberate deprivation of assets.
The Local Government and Social Care Ombudsman has provided guidance to local authorities on what they should consider when determining whether there has been a deliberate deprivation of assets.
The local authority is obliged to consider whether you “must have known that you may develop a need for care and support”, and whether you “had a reasonable expectation that you might need to pay towards that care”. If you genuinely had no reason to believe that you might require care (for example, because you are perfectly healthy, or if you are unwell, it is due to a condition that does not ordinarily require you to need care and support, then it may be wrong for a local authority to determine that there has been a deliberate deprivation of assets
The timing of your payments or transfers is also essential. Whilst there is no time limit on how far back the council can investigate your payments, it is usually the case that the greater the time between the transfer and the need for care arising, the less likely such a transfer will be deemed to be a deliberate deprivation of assets.
Protect Your Home From Care Fees
Get expert guidance on structuring your will and estate to safeguard your assets and reduce the risk of care home fee assessments.
Request your free, no-obligation consultation today.
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