The Council Financial Assessment and Your Parents' Home
If your parents are assessed as needing residential care, their local council will conduct a financial assessment (or 'means test') to determine their contribution towards care costs. This assessment considers their income, savings, and capital assets, which can include the value of their property. The rules vary slightly across England, Scotland, and Wales, but generally, if your parents' capital is above a certain threshold (e.g., £23,250 in England for 2025/26), they will be considered 'self-funders' and must pay their own fees until their capital falls below that limit.
How Your Home's Value is Calculated
If the property is included in the financial assessment, the council will use its current market value, deducting any outstanding mortgage or loan. They may also deduct up to 10% to account for selling expenses. It is important to note that the council does not take ownership of the house but expects the equity to be used to pay for care.
Circumstances Where the House is Disregarded
Crucially, the value of your parents' home may be disregarded in the financial assessment under certain conditions. This is a vital point for many families. Your parents' house will not be included in the assessment if it is the main home for:
- Your parents' partner or spouse.
- A relative who is 60 or over.
- A child of theirs under 18.
- A child of theirs aged 18-24 in full-time education.
- A relative who is incapacitated.
The local authority may also use its discretion to disregard the home if a carer has given up their own home to provide care.
The 12-Week Property Disregard
If a parent moves permanently into a care home and is liable to use their home to pay fees, but the property is empty, the council must disregard the value for the first 12 weeks. This provides a grace period for families to decide how to fund the care. During this time, the council may help pay for fees, but your parents will still need to contribute from their other income and savings. After 12 weeks, the property’s value is included in the assessment unless other arrangements, such as a Deferred Payment Agreement, are made.
Options for Using the House to Pay for Care
When a home is included in the financial assessment, several routes can be taken to use its value for funding care.
Deferred Payment Agreements (DPAs)
A DPA is a loan from the local council that allows your parents to defer paying their care home fees. The council essentially pays the fees and places a legal charge on the property, similar to a mortgage. The loan, plus interest and administration fees, is repaid from your parents' estate after their death or when the house is eventually sold. This prevents the stress of a forced, quick sale.
Renting the Property
If your parents are eligible for a DPA, they may choose to rent out the property to generate income to help with care costs. The rental income would then be used towards their fees, potentially reducing the amount borrowed under the DPA. However, this involves responsibilities as a landlord and the income will be included in the financial assessment.
Selling the Property
For self-funders, selling the property is often the most straightforward way to release the capital needed to pay for care. The proceeds are then used to cover the fees. This may be necessary if other assets are insufficient or if a DPA is not an option or desired.
Understanding Deprivation of Assets
One common concern is whether giving away the house to children can protect it from care fees. This is known as 'deprivation of assets', and local authorities are trained to spot it. They can investigate if assets were intentionally disposed of to reduce or avoid care fees, regardless of when the transfer happened—the common '7-year rule' is a myth relating to inheritance tax, not care fees. If deprivation is proven, the council can still treat your parents as if they still owned the asset, holding them liable for the fees. This can have severe consequences for families and should be avoided.
A Comparison of Funding Options
Here is a simple comparison of the main ways to fund care home fees from a property asset.
| Feature | Deferred Payment Agreement (DPA) | Selling the Property | Renting the Property |
|---|---|---|---|
| Funding Source | Loan from the local council, secured against the property. | Equity from the property's sale. | Rental income from tenants. |
| Timing of Sale | Deferred until after death or when the property is eventually sold. | Happens at the start of care, or once funds are needed. | Not required, though it can still be sold later. |
| Control of Asset | Parents/family retain ownership until sale, but the council has a charge. | Ownership transfers to the buyer upon sale. | Parents/family retain ownership and become landlords. |
| Costs | Interest charges and administration fees. | Estate agent fees, legal fees, and potential capital gains tax. | Landlord costs, management fees, and tax on rental income. |
| Benefit | Avoids an immediate, rushed sale; allows your parents to use the home's equity without selling. | Releases capital immediately to cover fees. | Provides a regular income stream to offset care costs. |
The Role of Professional Advice
Navigating the complexities of care funding is challenging. It is highly recommended to seek independent financial advice from an expert with specialist qualifications in later-life care, such as a Society of Later Life Advisers (SOLLA) member. A solicitor specialising in elder law can also provide guidance on legal matters like lasting power of attorney and wills.
Other Funding Avenues to Consider
Not all care is funded through local authority assessments. For individuals with complex health needs, NHS Continuing Healthcare (CHC) provides funding for care costs, regardless of financial means. The needs-based assessment for CHC is conducted by the NHS and is entirely separate from the council’s financial assessment.
Conclusion: Planning for the Future
Understanding what happens to my parents' house if they go into care in the UK depends on a thorough financial assessment and proactive planning. While the thought of selling the family home can be emotional, options like the 12-week disregard, Deferred Payment Agreements, and renting the property provide valuable alternatives to an immediate sale. The key is to address these matters early, involve your parents in the decisions, and seek expert advice to protect their assets and ensure they receive the best possible care. For more information on paying for care, consult reputable sources like Age UK.
Further Reading
For additional information and guidance on paying for care, including links to financial assessment details and support services, you can visit the Age UK website: https://www.ageuk.org.uk/information-advice/care/paying-for-care/.
