Care home fees and your home: the rules families should know

None of us can map a firm path through later life. Health, finances and families change, and it is tempting to deal with the here and now and leave the rest. But one of the most expensive things that can happen to a family is a move into residential care without any planning having been done, and it is far more common than most people expect.

A place in a residential care home now typically costs well over £1,000 a week in the South East, and a nursing home £1,500 or more. At those rates, savings that took a lifetime to build can be gone in two or three years. Some people are entitled to funded care; many are not. The result, which we see regularly, is that the family home is sold and the inheritance the person hoped to leave disappears.

Here is what you need to know and what can realistically be done.

Care comes in different forms

“Care home” covers both residential homes, where carers help with day-to-day living, and nursing homes, which provide round-the-clock nursing. Many people are better suited to care in their own home, either visiting carers or a live-in carer. A care needs assessment from your local council will establish what kind of care you need and is the starting point for any funding decision.

Whether you pay depends on how much you have

The council carries out a financial assessment. In England, if you have more than £23,250 in assessable capital you pay the full cost of your care yourself. If you have less than £14,250, your capital is ignored and only your income is assessed. Between the two you contribute on a sliding scale.

Those limits have not changed since 2010. Reforms passed in 2022 would have raised the upper limit to £100,000 and introduced an £86,000 cap on lifetime care costs, but they were cancelled by the government in July 2024. There is no cap, and no change to the limits is scheduled.

Some people qualify for NHS Continuing Healthcare. If your needs are primarily health needs rather than social care needs, the NHS pays the whole cost regardless of your wealth. Around 60,000 people in England receive it at any one time, and many more would qualify if they were assessed. Anyone facing care fees should ask for a Continuing Healthcare checklist before paying anything.

Your home is not always counted

The value of your home is included in the means test unless someone else is living in it. It is disregarded altogether while your husband, wife or civil partner lives there, and also where a relative aged 60 or over, a relative who is incapacitated, or a child under 18 continues to live there.

It is also disregarded for the first 12 weeks of a permanent care home placement. After that, you can ask the council for a deferred payment agreement, under which the council pays the fees and secures the debt against the property, to be repaid when the house is eventually sold. Interest is charged, but nobody should be forced to sell their home in their lifetime to pay for care.

Pensions are another common question. State pension is taken into account in full. Where you have an occupational or private pension and pay at least half of it to your spouse or civil partner who is still at home, that half is disregarded.

Giving assets away is a dangerous game

The question we are asked most often is: can’t I just give things away so that what is left falls below £23,250?

Strict rules prevent this. If the council concludes that you gave away or converted assets in order to avoid care costs, it treats you as though you still own them. This is called deliberate deprivation of assets. There is no time limit on how far back the council can look; what matters is whether the prospect of needing care was a significant factor when the gift was made. Transferring your house to your children, or giving each of them a lump sum as an “early inheritance”, is exactly the kind of transaction that gets caught.

There is a second problem. Once you have given money away, it is not yours. If the child you gave it to divorces, goes bankrupt, falls out with you or dies before you, it is gone, and so is your security.

Planning that does work

Wills for couples. This is the most effective step available to most families, and it is entirely lawful. If you own your home as tenants in common rather than joint tenants, the first of you to die can leave their half share into a trust for the survivor rather than to them outright. The survivor lives in the house for the rest of their life, but that half share is not theirs, and so it is not counted if they later need care. Half the value of the home is protected for the children, and the survivor’s own half is still there to fund their care if needed. We build this into wills as a matter of routine where it suits the family.

Lifetime trusts

Trusts set up during your lifetime can have a place in longer-term planning, for example, to pass property to the next generation in a controlled way, or to protect assets for a vulnerable family member. But they must be set up for the right reasons and well in advance. A trust created with care fees in view is treated in the same way as a gift under the deprivation rules, and there are schemes on the market that promise more than they can deliver. If you are considering one, take independent advice on why it is being done and be realistic about what it will and will not achieve.

Staying at home

Care at home, funded from savings, pension income, or equity release, avoids the question of selling altogether and suits many people better. Equity release is a regulated financial product and needs a specialist adviser. Alternatively the house can be let and the rent used towards care fees.

Paying for care efficiently

An immediate needs annuity converts a lump sum into a guaranteed, tax-free payment made directly to the care home for life, so the rest of the estate is ring-fenced. Again this is a matter for a regulated later-life financial adviser rather than a solicitor, but it is worth knowing it exists.

Claiming what you are entitled to.

Attendance Allowance is not means tested and is payable to people who fund their own care. A care home resident also keeps a personal expenses allowance from their income, and certain other income is partly disregarded. These sums are not large individually but add up over years.

Lasting Powers of Attorney.

None of the above can be put in place, or claimed, by someone who has lost the capacity to manage their affairs unless they have appointed an attorney. If you lose capacity without an LPA, your family must apply to the Court of Protection for a deputyship, which takes months and costs far more. Making LPAs while you are well is the foundation everything else rests on.

It is never too early to start

Planning does not mean settling everything now. It means understanding what you should think about over the coming months and years and taking it step by step. Wills can be updated and trust arrangements adjusted, so the fear of committing to something permanent should not stop you from starting. We encourage clients to set regular review dates so their planning keeps pace with their circumstances.

For advice on planning for care costs, including will trusts and Lasting Powers of Attorney, contact us today.

Emma Howlett