Many people worry that they will have to sell their home to pay for care. It is an understandable concern, and the rules are often misunderstood. This guide explains how care home fees and the means test work in England, what “deprivation of assets” means, and where Will planning fits in. It explains the rules only. It does not suggest that any planning will protect your home or savings from care costs.
Who pays care home fees?
In England, the local authority carries out a financial assessment (a means test) when you need care and support. This decides how much you contribute. If you have enough money, you will usually pay for your own care in full. The rules come from the Care Act 2014 and the government’s Care and Support Statutory Guidance.
The rules in Wales, Scotland and Northern Ireland are different. For example, Wales uses a single capital limit of £50,000 for residential care. This guide covers England only.
Care home fees and the means test in England
The means test looks at your income and your capital, such as savings, investments and property. The current capital limits in England, which have been frozen for many years, are:
- Upper capital limit: £23,250. If your capital is above this, you will usually pay the full cost of your care.
- Lower capital limit: £14,250. Capital below this is ignored, although you will still contribute from your income.
- Between the two limits, you pay a contribution from your income plus a “tariff income” of £1 a week for every £250 of capital above £14,250.
These figures can change, so check the current limits with your local authority.
Is my home included?
Your home is not counted if you receive care at home. It is also usually ignored if you move into a care home on a temporary basis.
If you move into a care home permanently, your home is normally counted. However, it must be ignored if certain people still live there, such as:
- your spouse, civil partner or partner
- a relative who is 60 or over, or who is incapacitated
- a child of yours under 18 whom you are responsible for
The local authority also has a discretion to ignore the property in other situations. In addition, your home is ignored for the first 12 weeks of a permanent stay. Also, you may be able to defer payment against the value of your home through a deferred payment agreement, so you do not have to sell it during your lifetime.
What is deprivation of assets?
Deprivation of assets is when someone deliberately reduces their capital or income so that they qualify for help with care costs, or pay less. For example, this might include:
- giving away money or property to family
- transferring a home or savings into a trust
- spending large sums unusually quickly
- converting assets into a form that is ignored in the means test
If the local authority decides deprivation has taken place, it can treat you as still owning the asset. This is called “notional capital”, and you are assessed as if you still had it. In some cases, it can also seek the money from the person who received the asset.
How do local authorities decide?
The test is set out in Annex E of the Care and Support Statutory Guidance. The local authority looks at the reasons for the disposal. Avoiding care charges does not have to be the only reason. Instead, it only needs to be a significant one.
Factors it considers include:
- timing: whether you could reasonably have expected to need care when you made the transfer
- purpose: whether there was another genuine reason, such as paying off a debt or helping a family member
- your health and circumstances at the time
There is no fixed time limit, such as seven years, after which a gift is safe. The seven-year rule applies to inheritance tax, not to care fees. So, a gift made well before any care need was foreseeable is less likely to be treated as deprivation, but it can still be challenged.
Where does Will planning fit in with care home fees?
Your Will deals with what happens to your estate when you die. It does not affect your own care fees assessment during your lifetime.
However, a Will can affect what happens to your share of the home after your death. For example, some couples who own their home as tenants in common leave their share in a Life Interest Trust. The surviving partner can then live in the home, and the share eventually passes to the people chosen in the Will, such as children.
The rules on how a trust share is treated if the survivor later needs care are complex and depend on the facts. A local authority may also look at the reasons the arrangement was made. So, any trust in a Will should be chosen for genuine family reasons, not as a way of avoiding care fees.
A Lasting Power of Attorney does not protect assets. However, it lets someone you trust deal with your finances, including paying for care, if you lose capacity. It also means your family can deal with the local authority more easily on your behalf.
You can read more about these issues on our page about protecting your home from care fees.
How A.D.E. Wills can help
As professional Will writers, we can:
- prepare a Will that reflects your wishes and your family circumstances
- explain how Will trusts, such as a Life Interest Trust, work and what their limits are
- prepare Lasting Powers of Attorney
We do not give financial advice or advice on paying for care. If you need it, we can refer you to an appropriate professional, such as a financial adviser accredited in later-life care funding. Age UK and your local authority can also explain the funding rules.
Next steps
If you would like to talk about your Will or LPAs with care costs in mind, call 01865 507174 or email info@adewills.co.uk. You can also read more about our estate planning services, and the GOV.UK guide to inheritance tax explains the separate seven-year gift rules.
