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Care home costs are expected to continue to escalate across the UK with social care funding remaining one of the most pressing financial, legal and political topics today.
Residential and nursing care home fees can easily exceed £1,000 to £1,500 per week with specialist services costing even more; this quickly eroding a lifetime’s worth of savings and property value.
When faced with these daunting figures, many families and individuals search for ways to safeguard their homes and savings for future generations. However, some well-intentioned steps can easily lead to severe legal traps.
Key Takeaways
Beware of Quick Fixes: Gifting money or property to avoid care fees almost always triggers Deprivation of Assets rules, which local authorities can enforce without time restrictions.
Use Legitimate Structures: Life Interest Trusts within Wills offer structured, legal ways to preserve a portion of family wealth.
Act Proactively: The best time to organise your estate planning, LPAs, and Wills is while you are in good health, well before care needs arise.
1. The Cost of Care
In England, social care funding is strictly means tested. If you have capital (including savings, investments, and sometimes the value of your property) above £23,250, you are generally expected to pay the full cost of your care (self-funding).
Current Care Funding Thresholds:
- Above £23,250 – Fully self funded;
- Between £14,250 and £23,250 - You contribute on a sliding scale;
- Below £14,250 - Local authority support reaches its maximum level (subject to contribution from your pension income where relevant).
Due to planned caps on care fees being repeatedly delayed and scrapped, with average care stays lasting several years, families routinely see hundreds of thousands of pounds drained from an estate. Unsurprisingly, we often hear “Can I just give my home to my children now to avoid paying care fees?”
This is where many fall into a critical legal trap and where some dishonest individuals have elected to take advantage of desperate families.
2. The trap of giving away assets (Depravation of Assets)
Local authorities have strict rules and wide-ranging powers under the Care Act 2014 to investigate transactions where someone has deliberately reduced their wealth to avoid care costs; this is known as intentional depravation of assets.
What constitutes Deprivation of Assets?
Deprivation of assets is when someone knowingly reduces their savings, property or income so that it will not be considered during a local authority financial assessment. This can include:
- Gifting large sums of money or transferring property ownership (e.g. signing your house over to your children or putting it in a trust);
- Selling an asset below market value;
- Sudden, unusual spending sprees or buying exempt assets specifically to hide wealth;
- Gambling;
- Putting money into trusts shortly before or after care needs arise.
Common Misconceptions
The "7-Year Rule": Some people confuse Inheritance Tax (IHT) rules with care funding rules. While gifts may fall outside your estate for IHT after 7 years, there is no time limit for local authority investigations into deprivation of assets. A local authority can look back as far as they deem necessary but must demonstrate that the intention behind your actions was to avoid care costs.
The key considerations for the local authority are foreseeability and motive. If at the time you transferred the asset, it was reasonable to expect you might need care, and avoiding care fees was a significant reason for the transfer, the local authority will treat it as intentional deprivation.
The Consequences of Deprivation of Assets
If a local authority rules that deliberate deprivation occurred, they can treat you as still possessing the asset (notional capital). As a result:
- The local authority may refuse to fund your care, forcing you to find the money to fund your care as though you still have assets to do so;
- Under circumstances where assets have been transferred to your family, the council can seek to recover the unpaid fees directly from your family.
These investigations can take time and ultimately cause delay in arranging residential care. This can lead to additional stress in an already tense situation.
3. Legitimate Ways to Protect Your Estate
While you cannot simply give away assets to avoid care fees, there are lawful strategies to structure your estate wisely, and ensure your loved ones are protected.
Life interest trust Wills
For couples who co-own a home, a Life Interest Trust Will offers a legal, effective way to safeguard wealth.
1. Sever the Tenancy
Change property ownership from Joint Tenants to Tenants in Common so each partner owns a distinct 50% share of the property.
2. Draft Life Interest Wills
Include a Life Interest Trust in each partner's Will specifying that upon the first partner's death, their 50% share passes into trust rather than outright to the surviving spouse.
3. Protect the Estate
The surviving spouse retains a legal right to live in the property for life. If they later enter care, only their 50% share can be assessed for care fees. The deceased's 50% share remains ring-fenced for ultimate beneficiaries (such as children).
Why it Helps
If the surviving partner later requires care, only their 50% share of the property can be assessed for care fees. The deceased’s 50% share in the trust is protected for the ultimate beneficiaries such as the children. Because this only takes effect on death, it does not trigger the deprivation rules during the person's lifetime.
Immediate Needs Annuities & Financial Planning
Independent financial advice can help explore specialist care fee annuities or insurance products that guarantee an income stream to meet care costs without selling your key assets.
To ensure your care journey and estate plans run smoothly, follow these proactive steps:
- Put LPAs in place early
Execute both Property & Financial Affairs and Health & Welfare Lasting Powers of Attorney while you have full capacity.
- Review property title
Check whether your home is owned as Joint Tenants or Tenants in Common.
- Avoid unvetted Trust schemes
Be wary of unregulated companies selling "care fee avoidance trusts."
- Seek professional legal advice
Ensure your Will is professionally drafted with appropriate trust structures.
Contact us
If you would like advice on any of the issues raised above, please contact us via our website, or call us on 01384 410 410 and a member of our team will be happy to assist.