In England, many people approaching later-life care worry about the prospect of selling their family home to cover the costs. The reality is more nuanced than a simple 'yes' or 'no', depending heavily on your individual circumstances and financial situation. Understanding the rules governing how social care is funded is crucial for informed decision-making.
The Financial Assessment (Means Test)
Before a local authority provides or helps fund social care, it conducts a financial assessment, or means test. This determines how much you can afford to contribute to your care costs by looking at your income and capital, such as savings, investments, and property.
Capital Limits and Contribution Levels
In England, there are capital limits that dictate how much you must contribute. As of the current rules, these limits are:
- Over £23,250: You are considered a 'self-funder' and must pay your care fees in full.
- Between £14,250 and £23,250: The local authority provides some financial support, and you make a contribution from your income and a 'tariff income' from your capital.
- Under £14,250: The local authority provides financial support, and you contribute what you can from your income, but not your capital.
For residential care, if your total capital, including the value of your home, exceeds £23,250, you are likely expected to self-fund. For care at home, the value of your main residence is not included in the financial assessment.
When Your Home is Disregarded
Your home's value will not be included in the financial assessment for permanent residential care under several circumstances, preventing the need for an immediate sale. These include:
- Your partner, spouse, or civil partner continues to live in the home.
- An eligible relative aged 60 or over continues to live in the home.
- A relative with a disability continues to live in the home.
- A child under 18 for whom you are legally responsible continues to live in the home.
Exploring Alternatives to an Immediate Sale
If your home's value is included in your financial assessment, selling your home is not the only option. The Care Act 2014 established schemes to help, and other financial strategies are also available.
Deferred Payment Agreements (DPAs)
A DPA is an arrangement with your local council that effectively provides a loan to cover care home costs, with the debt secured against your property. The council pays the care home, and you repay the accumulated debt, plus interest and admin fees, at a later date, typically when the property is sold or from your estate after your death.
To qualify for a mandatory DPA, you must:
- Be assessed as needing permanent residential care.
- Own your home (or have a legal interest in it) and no eligible relative still lives there.
- Have savings and capital below the £23,250 threshold, excluding your home's value.
- Be able to offer a legal charge on your property as security.
Renting out your property
You can choose to rent out your home and use the rental income to help pay for your care fees. This can reduce or eliminate the need for a DPA. However, remember that rental income is taxable and can affect your entitlement to certain benefits.
Equity Release
For those over 55, equity release schemes like a lifetime mortgage allow you to access the value tied up in your property without selling it outright. The loan, plus interest, is repaid from your estate when the property is eventually sold. However, interest can be expensive, and some schemes may require the property to be sold within a set timeframe if you move into residential care. Always seek independent financial advice before considering this option.
A Comparison of Funding Options
| Option | Pros | Cons | Eligibility |
|---|---|---|---|
| Selling your home | Generates a lump sum of capital immediately; ends ongoing property costs like insurance and maintenance. | Highly emotional; may not be necessary; can complicate benefit eligibility; proceeds may exceed capital limit. | Not always necessary; depends on financial assessment and situation. |
| Deferred Payment Agreement | Allows postponement of sale; council manages payments; gives time to arrange sale at a favourable time. | Accumulates debt with interest and fees; debt is secured on property; requires qualifying for the scheme. | Must need permanent care, meet capital limit (excluding home), and offer security. |
| Renting your property | Maintains ownership of the asset; generates regular income to offset care fees. | Landlord responsibilities; rental voids can impact income; rental income is taxable and affects some benefits. | Requires council approval if you have a DPA; income affects means test. |
| Equity Release | Access to capital without selling; allows you to remain a homeowner. | High interest costs; may be complex; could reduce the inheritance for your family. | Must be over 55; product dependent terms and conditions. |
The “Deprivation of Assets” Rule
If a council believes you have deliberately given away money or property to avoid paying for care, it can assess you as if you still have that asset. This is known as the 'deprivation of assets' rule. The council will investigate and can treat you as still owning the property, making you liable for the fees. This applies to gifts or transferring ownership of your home to a relative.
Planning for the future
Making plans early is vital. While you can't be forced to sell your home to pay for care in England, the rules are complex. Start by getting a care needs assessment from your local council. Consider options like DPAs, renting, or equity release. Always seek independent legal and financial advice to understand the implications of each choice and create a plan that works best for your situation.
