How to avoid selling your house to pay for care in England?

With UK life expectancy rising to 82 years by 2022, according to one report, more people are facing the challenge of paying for long-term care. It is a common concern that moving into residential care will necessitate selling the family home. This authoritative guide explains how to avoid selling your house to pay for care in England.

Quick Summary

You can avoid selling your house to pay for care through legal provisions like deferred payment agreements, equity release, or by transferring ownership under specific conditions. Understanding the financial assessment rules and seeking early expert advice is crucial to protect your assets.

Key Points

• Understand Financial Assessments: Know the £23,250 capital limit in England and how a means test determines your contribution to care fees.

• Know Your Property Disregards: Your home's value is ignored if a spouse, certain relatives, or dependents continue to live there. The 12-week disregard also provides a grace period.

• Consider a Deferred Payment Agreement: Arrange a loan with the local council, secured against your property, which is repaid from your estate after death.

• Explore Equity Release Schemes: Unlock the value in your home without selling it, using the funds for care while living in the property.

• Beware of Deprivation of Assets: The local authority can challenge any transfer of assets made with the intention of avoiding care fees, even years later.

• Seek Specialist Advice: Consult an independent financial adviser or solicitor specialising in later-life planning to ensure your chosen strategy is robust and legally sound.

• Act Early: Proactive financial planning, including setting up a Lasting Power of Attorney, is the most effective way to protect your assets.

Understanding England's Care Funding Landscape

When an individual requires long-term residential care, the local authority conducts a financial assessment, or 'means test', to determine their contribution. This assessment considers your income and capital, which includes savings and property. In England, the upper capital limit is £23,250. If your capital exceeds this, you are generally required to pay for your own care costs. For many, the family home represents the largest asset, putting it at risk. The key to protecting your home lies in understanding the complex rules and legal avenues available.

The Care Needs Assessment Process

Before any financial assessment, a care needs assessment is conducted by the local council to determine the type of care required. It is only when residential care is deemed necessary that the value of your home may be included in the financial assessment. If care can be provided at home, the value of your property is not taken into account.

Property Disregards: When Your Home is Excluded

In certain situations, the value of your home will be completely disregarded during the financial assessment. This is a critical first step in protecting your property. The value of your home is not counted if it is occupied by any of the following people:

• Your spouse or civil partner.
• A partner you live with as if married or in a civil partnership.
• A relative who is 60 or over.
• A relative who is incapacitated due to disability.
• A child of yours who is under the age of 18.

There is also a special '12-week property disregard' for those moving into residential care permanently. For the first 12 weeks, the value of the property is ignored, giving you time to arrange alternative funding. If your home is sold during this period, you will have to pay for your own care if your remaining capital is over the threshold. Planning for what happens after this 12-week window is vital.

Jointly Owned Property

If you own your home with someone else, only your share of the property's value is included in the financial assessment. The council must then calculate the value of your share, which is often less than half the property's value, as it is difficult to sell a part-ownership interest.

Strategic Financial Options to Protect Your Home

Beyond property disregards, several formal strategies exist to help protect your home from being sold to pay for care fees. Seeking independent financial advice from a specialist, such as one registered with the Society of Later Life Advisers (SOLLA), is highly recommended before proceeding.

1. Deferred Payment Agreements (DPAs): This is a loan scheme offered by local councils. If you are eligible, the council pays for your care home fees, with the loan secured against your home. The debt is then repaid when your home is eventually sold, often after your death. You must meet certain criteria, including having savings below the capital limit (excluding your home). The council will charge interest and an administration fee.
2. Equity Release: Available for those aged 55+, this allows you to release money from your property without having to sell it immediately. Options include lifetime mortgages and home reversion plans. The loan, plus interest, is repaid when the property is sold, which typically occurs after you move into permanent care or pass away. It is important to consider the impact on inheritance.
3. Renting Out Your Home: If you move into a care home, you can rent out your property and use the rental income to contribute towards your fees. This can significantly reduce the amount you need to pay from other assets. However, rental income is taxable, and you will need to manage the responsibilities of being a landlord.

The Use of Property Trusts

Placing your home into a trust is a legal option, but it comes with significant risks regarding care fees. By transferring your home into a trust, it technically no longer belongs to you, so its value is not included in the financial assessment. However, local authorities are very adept at identifying 'deliberate deprivation of assets.' If they determine the primary motivation for creating the trust was to avoid care fees, they can act as though you still own the asset and bill you for the care. Seeking specialised legal advice years in advance is essential if considering this route. Different trusts, such as a Life Interest Trust (often used by couples), have varying levels of protection.

Avoiding the Deprivation of Assets Trap

Deprivation of assets is a serious consideration. The local authority will investigate the transfer of any assets if you need care within a specific timeframe. There is no set time limit, and the council will look at your intentions at the time of the transfer. If the primary reason was to reduce the amount you would have to pay for care, the action will be scrutinised. Common examples of deprivation include:

• Giving away a large lump sum of money or property.
• Spending a significant amount extravagantly.
• Transferring ownership of your property to a family member.

To avoid a successful challenge, any asset transfer must have a valid reason unrelated to care fees, with clear evidence to support it. The local authority has the power to reclaim the asset or treat you as if you still have the asset's value.

Comparison of Funding Options

Feature	Deferred Payment Agreement (DPA)	Equity Release (Lifetime Mortgage)	Property Trust
Ownership	You retain ownership.	You retain ownership.	The trust owns the property.
Repayment	After the property is sold, typically post-death.	After the property is sold, typically post-death.	Depends on the trust's terms; value protected from assessment.
Flexibility	Council manages the debt.	You receive a lump sum or income.	Set up legally in advance.
Associated Costs	Council charges interest and admin fees.	Compound interest can be high.	Legal fees for setup.
Risk	Secure loan on your home; interest accrues.	Reduces inheritance; interest accrues.	High risk of being challenged as deliberate deprivation.
Timeframe	Arranged when care is needed.	Can be arranged at any time.	Must be set up well in advance.

Planning for the Future

Proactive and early planning is the most effective way to protect your home and finances. Discussing your options with family members and seeking independent, specialist financial advice is crucial. Appointing a Lasting Power of Attorney (LPA) for property and financial affairs ensures that a trusted person can manage your finances and make decisions on your behalf if you lose mental capacity. This provides control and a clear strategy for the future. Understanding your options and acting early can help secure your financial future and allow you to leave a legacy for your loved ones.

For more detailed information on paying for residential care in England, visit the official government website: https://www.gov.uk/government/publications/care-and-support-statutory-guidance/care-and-support-statutory-guidance.

Conclusion

Navigating the complexities of care funding in England requires careful planning and a clear understanding of the rules. You can protect your family home by leveraging property disregards, deferred payment agreements, and exploring other financial products like equity release. While property trusts offer a potential solution, the risk of falling foul of the 'deliberate deprivation of assets' rules is significant and requires careful consideration and expert legal counsel. The most important step is to start planning early to make informed decisions that align with your long-term financial goals and wishes.

Frequently Asked Questions

Will my house always be included in a financial assessment for care in England?

No, your house is not always included. If you receive care in your own home, its value is excluded. It is also disregarded if certain people, such as a spouse, still live there after you move into permanent residential care. There is also a 12-week disregard period at the start of residential care.

What is a Deferred Payment Agreement?

A Deferred Payment Agreement (DPA) is a loan from your local council to help pay for care home fees. The loan is secured against your home, and the council is repaid from the proceeds of the property sale, typically after your death. You are still charged interest and an administration fee.

Can I give my house to my children to avoid care home fees?

You can, but it carries a high risk of being challenged under 'deliberate deprivation of assets' rules. If the local authority believes you gifted the property primarily to avoid care fees, they can act as if you still own it and charge you accordingly. There is no time limit for this challenge.

What if my house is jointly owned?

If your home is jointly owned, only your share of the property is included in the financial assessment. The value of this share is calculated by the council, often at a reduced rate due to the difficulty of selling a partial interest.

What is equity release and how can it help with care costs?

Equity release is a way to access the tax-free cash tied up in your home without having to sell it. The money can be used to pay for care fees. The loan and accrued interest are then repaid when the property is sold, usually after you pass away or move into care.

Are property trusts a good way to protect my home?

Property trusts can protect your home, but the risk of being accused of deliberate deprivation of assets is high if it's done with the intent to avoid care fees. They must be set up well in advance with a clear, legitimate reason, and require specialist legal advice.

What is the capital limit for care funding in England?

As of the current rules, the upper capital limit for financial assessment in England is £23,250. If your capital, including savings and property (if not disregarded), is above this amount, you are considered a self-funder.