Care home fees
Your home and paying for residential care (in England)
Whilst most of us would like to remain in our own home when we get older and be cared for there, sadly that is not always possible. As the level of care increases often the only option is to be looked after in a care home.
Costs average around £35,000 to £55,000 per year for a place in a care home. Many people are concerned about how they will be able to afford this and whether their home will have to be sold.
Whether or not you have to pay for your care fees will be assessed on the basis of a means test. The means test takes into consideration your capital, including your savings, investments and your home (but see below), and your income, including pensions and certain benefits. If your capital is above £23,250 the likelihood is that the liability of the costs will rest with you. The figures in Scotland Ireland & Wales are different and should be checked.
Will I have to sell my home?
For most people, their home will be their most valuable asset. The local authority will want to carry out a financial assessment of your means known as a “means test”. The means test will include your share of the property at its market value, less any outstanding mortgage or loan against the property. A 10% discount will also apply if there would be expenses to sell your home.
Your home will not be taken into account in the means test if you only need temporary or short-term care (less than 12 weeks). It will also be excluded if it remains occupied by:
- your spouse or civil partner
- partner or former partner (unless they are estranged from you)
- your estranged or divorced partner if they are also a lone parent
- a relative of yours who is aged 60 or over
- a child of yours who is aged under 18
- a relative who is disabled
What are my options if I do not want to sell my home?
- Enter into a deferred payment arrangement, which is a type of loan, whereby the payment of care fees can be delayed until a later date when the property is sold or after your death. Certain eligibility criteria must be met in order for this to be allowed and it may depend on your local council’s own policies.
- Rent out your property and use the income to help fund your care. The property would still be taken into account in the means test and because you are receiving gross rental income, tax returns would need to be completed.
- Consider a bridging loan or a short term deferred payment arrangement to pay the fees until the property is sold, if you are selling your property but cannot do this within the 12-week property disregard period.
- Consider care fee payment plans which are essentially insurance policies, whereby you pay an upfront premium and the policy pays a regular income to help pay for your care.
- Weigh up the pros and cons of equity release to free up money from your home to pay for your care.
You should consider taking independent financial advice before entering the above.
Can I give my home away?
Not easily. You may consider gifting your home or other assets to close relatives. Several problems can arise with this, the most pressing being that this would be a deliberate deprivation of assets, if your reason for doing so is to avoid paying for your care. If this is found to be the case, you would still be required to pay the same level of fees as if you had not given the assets away.
Further issues arise if you were to give your home away and then continue to live there. If the new owner gets divorced, becomes bankrupt, or decides to sell the house, your home could become subject to legal proceedings and you could become homeless. There can also be inheritance tax, capital gains tax and stamp duty issues.
If you are considering taking action to protect your home against care home fees then you must take specific advice and speak to your local SFE lawyer.