Understanding the Care Funding System in the UK
In the UK, a means-tested assessment determines how much you need to contribute towards your care. If your capital (including savings and property) is above the upper limit (£23,250 in England as of 2025), you are expected to pay for your own care in full. The threshold is different in other parts of the UK. For those with assets below this figure, the local council can help with costs. The key to mitigating these expenses is understanding the rules and planning early.
Accessing NHS Continuing Healthcare (CHC)
One of the most effective ways to avoid care home fees is to be eligible for NHS Continuing Healthcare (CHC). This is a package of care provided and funded by the NHS for individuals who have a 'primary health need'. A person's financial situation is irrelevant for CHC eligibility. If you believe your or a loved one's needs are primarily health-based, you should request a CHC assessment. The eligibility criteria are stringent, but successful claims can cover all care costs. You can challenge an initial decision if you believe it is incorrect.
The Role of NHS-funded Nursing Care (FNC)
Even if you do not qualify for full CHC, you may be eligible for NHS-funded Nursing Care (FNC) if you are in a nursing home. The NHS pays a set weekly rate directly to the care home to cover the cost of nursing care provided by a registered nurse. This payment is not means-tested, meaning you are entitled to it regardless of your financial assets, which can help reduce your overall weekly fee.
Property and Asset Protection Strategies
Deferred Payment Agreements (DPA)
If you own your home but do not want to sell it immediately to pay for care fees, you can apply for a Deferred Payment Agreement from your local council. This scheme allows the council to pay for your care home fees while deferring the cost, which is then paid back later, typically from the sale of your property after you pass away. While a DPA can delay selling your home, interest and administration fees may be charged on the deferred amount. One benefit is the possibility of renting out your home to generate income towards the fees.
The Impact of Property Ownership and Occupancy
Your property may be disregarded from the financial assessment if certain individuals continue to live there. This includes:
- Your spouse or civil partner.
- An unmarried partner.
- A close relative aged 60 or over.
- A close relative under 60 who is incapacitated.
- A child under 18 for whom you are legally responsible.
This is a crucial rule that can protect a significant asset. It is important to confirm the current occupancy criteria with your local authority, as they can vary slightly.
Understanding Deprivation of Assets
Local authorities are vigilant about preventing deliberate deprivation of assets. This is where a person intentionally reduces their assets (e.g., by giving away property or large sums of money) to avoid paying care home fees. If the council can prove that the primary motivation for gifting an asset was to avoid care fees, they can act as if you still own the asset and include its value in the means test. There is no time limit for councils to investigate this, unlike the seven-year rule for inheritance tax. Legal advice should be sought to ensure any asset transfers are not challenged.
Using Trusts for Asset Protection
For those planning well in advance, trusts can be a legitimate way to protect assets. This is a complex area of law and requires specialist legal advice.
- Protective Property Trust: Often set up in a Will, this can be used when a property is jointly owned. On the death of the first partner, their share of the property is held in trust for the children, and only the surviving partner's share is assessed for care fees. The surviving partner has the right to live in the property for life.
- Asset Protection Trust (Lifetime Trust): This involves transferring assets into a trust while still alive. It is only effective if set up years before care is needed and must have clear motivations other than solely avoiding care fees. If done too late, it will likely be challenged as deliberate deprivation.
Legal vs. Deliberate Deprivation of Assets
| Action | Legality & Assessment | Risk of Challenge | Outcome | Example |
|---|---|---|---|---|
| Gifting assets | Can be challenged if local authority believes the intent was to avoid care fees. | High, especially if done close to needing care. | Asset value may still be counted in means test. | Giving away your house to a child after a care diagnosis. |
| Prepaying funeral costs | A legitimate way to reduce capital. | Very low, considered reasonable expenditure. | Asset value is genuinely reduced. | Setting up a pre-paid funeral plan to lower your savings. |
| Home ownership exemption | Legally protected if a qualifying relative lives there. | None, provided rules are followed. | Property value is disregarded from means test. | Partner continuing to live in the family home. |
| Using asset protection trusts | Legal, but timing and purpose are critical. Must be set up well in advance. | Moderate to High, if not structured correctly or done late. | Can protect assets if the deprivation of assets rules are avoided. | Setting up a protective property trust via your Will. |
| Maximising state benefits | Legitimate and encouraged by authorities. | None. | Increases income, potentially reducing reliance on capital. | Claiming Attendance Allowance or Pension Credit. |
Conclusion: Strategic Planning Is Key
Avoiding care home fees in the UK is a challenging but not impossible task. Proactive and early financial and legal planning is essential. Strategies range from proving eligibility for NHS Continuing Healthcare, which covers all costs, to utilising legal instruments like trusts and deferred payment agreements. The most significant hurdle is the 'deprivation of assets' rule, which requires careful and well-timed planning to avoid penalties. For anyone concerned about their financial future in older age, the best course of action is to seek expert advice from a solicitor or financial advisor who specialises in elder law. This will ensure any steps taken are legitimate, effective, and align with your long-term goals for financial security and leaving an inheritance for your loved ones. Further details on financing care can be found on the Age UK website.
Seeking Professional Advice
Given the complexities and strict regulations surrounding care fees and asset protection, consulting with qualified professionals is highly recommended. An independent financial advisor can provide guidance on products like long-term care insurance, while a solicitor specialising in elder law can advise on trusts and estate planning. This expert guidance can help you navigate the system legally and effectively.
