Understanding What Assets Are Taken into Account for Care Home Fees?

According to Age UK, if your capital is above a certain threshold, you are likely to have to pay your care fees in full after a financial assessment. This makes understanding what assets are taken into account for care home fees crucial for effective financial planning and peace of mind.

Quick Summary

Local authorities conduct a means test, which considers both a person's income and capital to determine their contribution towards care home costs. Countable assets typically include savings, investments, and property, though some assets like the main home may be disregarded under certain circumstances.

Key Points

• Countable Assets: The financial assessment for care home fees includes a wide range of assets, such as bank savings, investments, and additional property.

• Exempt Assets: Some assets are exempt from the means test, notably personal possessions and the main home if a spouse or certain relatives still live there.

• Property Rules: The main home is typically disregarded if a partner remains living there, but its value will be included after 12 weeks of permanent care if the resident is the sole occupant.

• Deprivation of Assets: Giving away money or property to deliberately avoid care fees is investigated by local authorities and can result in significant financial penalties.

• Financial Thresholds: The amount of local authority funding depends on national capital limits, with those above the upper limit expected to self-fund their care.

• Seeking Advice: Due to the complexities, it is highly recommended to seek professional legal and financial advice when planning for long-term care costs.

The Financial Assessment Process

When an individual requires long-term care in a care home, the local authority conducts a financial assessment, often referred to as a means test. The purpose of this assessment is to determine how much the individual must contribute towards the cost of their care. It’s a comprehensive review of the individual's finances, including income and capital.

Countable Assets: What Is Included?

For the financial assessment, local councils consider a person's capital and income. The capital component includes a wide range of assets that can be converted into cash. These are the assets that are typically taken into account for care home fees:

• Savings: This includes money held in bank and building society accounts, ISAs, and premium bonds.
• Investments: Stocks, shares, unit trusts, and other investment portfolios are all typically considered.
• Property: The value of any property or land you own, besides your main home under certain conditions, can be included in the assessment.
• Business Assets: If you own a business, those assets will generally be counted, though there may be temporary exemptions if they are being sold.
• Bonds and Other Financial Products: The value of certain financial products that could be cashed in will also be assessed.

Exempt Assets: What Is Disregarded?

While the list of countable assets is long, several key assets are disregarded during the financial assessment. These are important exemptions that can protect a significant portion of an individual's estate:

• The value of a main home is often disregarded, particularly for the first 12 weeks of permanent residential care. It is also ignored indefinitely if a spouse, partner, or certain relatives (over 60, under 16, or incapacitated) continue to live in it.
• Personal Possessions: Items such as a car, clothing, jewelry, and furniture are generally disregarded, unless they are of very high monetary value and considered an investment rather than a personal possession.
• Life Insurance Policies: The surrender value of a life insurance policy is typically exempt.
• Certain Pensions: The capital value of occupational pensions is usually exempt, although the income derived from it is not.
• Personal Injury Awards: These are often disregarded for a period or held in trust to be disregarded indefinitely.

Special Consideration for Property

Property is often the most significant asset and a major concern for many families. The rules are complex and depend on who resides in the home. Here is a simplified breakdown of the key scenarios:

• If a spouse or partner remains in the home: The property's value is completely disregarded from the financial assessment.
• If a relative remains in the home: The property may be disregarded if the relative is over 60, under 16, or incapacitated.
• If the resident is the sole occupant: The property is disregarded for the first 12 weeks of permanent care. After this period, its value is usually included in the assessment unless there are other qualifying occupants. Many people use a deferred payment agreement in this situation, allowing the council to be paid back from the sale of the house later.

The Issue of Deliberate Deprivation of Assets

Some individuals might attempt to reduce their assets to avoid or minimize care home fees, such as by giving away money or property to relatives. This is known as a 'deliberate deprivation of assets' and local authorities have the power to investigate and, if proven, treat the individual as if they still own the asset. This could mean a significant and unexpected financial burden for the family, so it's vital to seek expert advice before gifting any significant assets with the intention of avoiding care costs.

The Financial Thresholds and Calculation

Financial assessments are based on national upper and lower capital limits. These limits determine how much, if any, financial assistance a person is entitled to from the local authority. If a person's assets exceed the upper limit, they are deemed a 'self-funder' and must pay their care fees in full. If their assets fall below the lower limit, they will be entitled to maximum support, with the council paying for their care. For assets between the two limits, the council provides some funding, but the individual must contribute from their capital and income.

How the Financial Contribution is Calculated

1. Add up all countable assets and income. This includes all savings, investments, property (if not exempt), and any regular income from pensions or benefits.
2. Disregard exempt assets. The value of the main home, personal belongings, and certain financial products are removed from the calculation.
3. Check against capital limits. The total countable capital is compared to the national upper and lower limits.
4. Calculate contribution from capital. A 'tariff income' is assumed for every £250 of capital between the upper and lower limits, requiring a weekly contribution.
5. Calculate contribution from income. Most income, including pensions and benefits, is included in the assessment. A certain amount is disregarded for personal expenses.

A Table of Countable vs. Exempt Assets

Type of Asset	Is it taken into account?	Notes
Savings Accounts	Yes	Includes ISAs, premium bonds, bank accounts.
Investments (Stocks/Shares)	Yes	Includes any stocks, shares, or unit trusts.
Main Home	Sometimes	Disregarded if a spouse or certain relatives live there.
Second Property	Yes	Valued and counted as part of capital.
Personal Possessions	No	Generally exempt unless deemed an investment.
Life Insurance (Surrender Value)	No	The capital value is typically disregarded.
Business Assets	Yes	Included in the assessment, unless an exemption applies.
Occupational Pension (Capital)	No	Capital value is disregarded; income is counted.

Planning for Care Home Fees

Effective financial planning for care costs is vital for protecting your assets and ensuring your wishes are respected. Given the complexity of the financial assessment, seeking legal and financial advice early is crucial. An expert in elder law can help you navigate the system, understand all your options, and explore legal mechanisms for protecting assets, such as trusts. Taking a proactive approach can help you make informed decisions and mitigate the financial burden on you and your family.

For more detailed guidance on financing later life, you can explore resources from official bodies like MoneyHelper.

Conclusion

Navigating the financial assessment for care home fees requires a detailed understanding of both countable and exempt assets. While savings, investments, and second properties are almost always included, the main home may be protected under specific circumstances. The rules around deliberate deprivation of assets make professional financial and legal advice essential to avoid complications. By planning ahead and understanding the system, individuals can ensure they are as prepared as possible for the costs of long-term care and protect their financial well-being.

Frequently Asked Questions

What is the capital limit for care home fees in the UK?

The capital limits for care home fees vary by country within the UK and are subject to change. As of 2025, if your capital is above the upper limit (£23,250 in England), you are generally expected to pay for your care home fees in full.

Does my pension count towards care home fees?

Your regular pension income is taken into account during the financial assessment. However, the capital value of an occupational pension pot is typically disregarded as a countable asset.

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

Gifting your property to relatives to avoid paying care fees is considered 'deliberate deprivation of assets' by local authorities. If proven, the council can still treat the property's value as part of your assets, so it is not a reliable strategy.

What if I own a property with my partner?

If you are moving into a care home but your partner or spouse continues to live in your main home, its value will be completely disregarded from your financial assessment.

What happens to my assets if my care is arranged privately?

If you arrange and pay for your care home placement yourself without involving the local authority, there is no financial assessment. Your assets are not considered by the council, though this means you must cover all costs yourself.

What is a deferred payment agreement?

A deferred payment agreement is an arrangement with your local council that allows you to delay paying for your care home fees. The council secures the debt against your property, and the fees are repaid later, typically from the proceeds of the property's sale.

Are certain types of disability benefits included in the assessment?

While most benefits are counted as income, certain disability-related benefits, such as the mobility component of Disability Living Allowance, may be disregarded in the financial assessment.

What are the rules for joint assets with someone else?

If you hold assets jointly with another person, the local authority will typically count 50% of the value of that asset as belonging to you in the financial assessment.