How can I avoid care home fees?

Avoiding care home fees

Many people ask whether it is possible to shelter their assets from care home fees, perhaps by putting them into trust or gifting them away.

Some websites argue that this will be seen as depriving yourself of assets and say that anything you do will be challenged by the Local Authority. So what really is possible, within the law?

Care fees: when do I have to pay?

NHS Continuing Healthcare scheme

If you develop long term complex health needs, you may be eligible for the cost of your care to be paid for under the NHS Continuing Healthcare scheme. You will be assessed by a team of healthcare professionals (a multidisciplinary team) who will look at all your care needs and relate them to:

  • what help you need
  • how complex your needs are
  • how intense your needs can be
  • how unpredictable they are, including any risks to your health if the right care isn’t provided at the right time

Your eligibility for NHS continuing healthcare depends on your assessed needs, and not on any particular diagnosis or condition.

If eligible, you may not have to pay some or all of your care costs – regardless of your income or assets.

Means test

Continuing Healthcare (CHC) funding is extremely limited and many people find that they are not eligible. If you are not entitled to funding, the Local Authority will then perform a means test to see if you can afford to pay for your own care.

A Financial Assessment Officer from the council will visit you at home to ask about things like your:

  • earnings
  • pensions
  • benefits (including Attendance Allowance or PIP)
  • savings
  • property (including overseas property)
  • things that you used to own which you have given away

They won’t need to know about the value of your possessions or any life insurance policies.

If you live with a spouse or civil partner, or an elderly relative, the value of your home will not be taken into account when carrying out the test.

Generally, if you have assets of £23,250 or more (excluding personal possessions) you will be expected to pay for your own care. Once your savings reach the £23,250 threshold, the Council will start to contribute to the cost. When your savings deplete to a lower £14,250 threshold, the Council will take over the cost entirely. Note however that the Council’s contribution is capped. If you need residential care, for example, you will have to work with whatever budget they give you.

What doesn’t work?

Gifts to avoid care home fees

The first thing to note is that you can’t simply gift your home to your kids with the primary goal of avoiding care fees. If you intentionally reduce your assets – whether money, property or income – with this goal in mind, it is known as a ‘deprivation of assets’. If your local council concludes you have deliberately reduced your assets to avoid paying care home fees, they may still calculate your fees as if you still owned the assets. Local Authorities are severely underfunded, particularly following the Covid-19 outbreak; and they are actively pursuing those who have deprived themselves of assets to avoid care.

Some ways that people try to reduce their assets, besides making cash gifts, include:

  • Transferring the title deeds of their home or other properties to someone else such as their children.
  • Suddenly spending a lot of money in a way which is not typical for their spending habits.
  • Gambling the money away.
  • Using savings to buy personal possessions, such as jewellery or a car, which would be excluded from the means test.

When is it a ‘deprivation of assets’?

The timing of reducing your assets is important. If when you reduced your assets, you were fit and healthy with no foreseeable care needs, the Council will be less likely to find that you have deliberately deprived yourself of assets. Further, if there was some other clear motive, such as helping a child purchase their first home or paying a grandchild’s school fees, this will also help to show that you were not deliberately reducing your assets.

If, on the other hand, the need for care was on the horizon and there really was no other genuine motive than avoiding paying for care, the above acts would be likely to be classed as a deprivation of assets.

Putting your house in trust to avoid care home fees

Sometimes, people will consult with companies that will transfer their assets into a so-called ‘Asset Protection Trust’ during their lifetime to put them out of reach of care. Those companies promote the idea that doing so avoids the need for probate and they state that this is a legitimate excuse for the transaction. In reality, probate is almost always needed so the excuse will rarely be valid. Further, many of the companies and so-called ‘lawyers’ offering such services are not regulated by the Solicitors’ Regulation Authority. and may be unscrupulous.

What do others say about Asset Protection Trusts?

STEP, the Society of Trusts and Estates Practitioners, states:

“Many qualified practitioners consider that such devices do not deliver what they promise, in that local authorities are entitled to disregard the trust when assessing the individual’s assets, under the deliberate deprivation of assets rules”.

Age UK describes such trusts as

“effectively a worthless piece of paper”.

The Solicitors Regulation Authority states:

“We are aware of the issue of mis-selling of asset protection trusts. If necessary, we will work with other regulators.”

The North East Trading Standards Association notes:

“The potential limitations of such products are also not always conveyed to the homeowner. Local authorities have a legal right to overturn any gifts into such trusts where they can prove that there has been a ‘deliberate deprivation of assets’. For this reason, customers who take out an Asset Protection Trust or similar could find themselves challenged by the local authority at a later date.”

In May 2015 eight people were jailed at Nottingham Crown Court for mis-selling so-called asset protection trusts to elderly clients.

Avoiding care home fees legitimately

Rather than making gifts or putting your house into trust, there are legitimate ways that spouses and civil partners can protect a portion of their assets from care fees.

Remember that whilst your spouse or civil partner is alive, the Local Authority will not take the value of your home into consideration when performing a means test. However, after the first person dies, the whole estate can be exposed if everything is left to the survivor.

The solution is to ensure that properties are held as ‘tenants in common‘ which means each owner has a defined share – usually 50%. This allows each person to deal with their share as they wish in their Will.

The couple will then leave each other a ‘life interest’ in their Wills – that is, the right to use the other’s share for life, after which it will go to their choice of beneficiaries. The benefit is that the survivor only has use of the first-to-die’s share – they do not own it outright. If the survivor needs care, the first-to-die’s share is protected and cannot be included in a means test.

The first-to-die can use their Will to leave a life interest in any of their assets – not just their share of the family home. They should make sure that the survivor has enough funds to live on, although a ‘power to appoint’ can be reserved to the trustees. This means that if the survivor does need some of the assets that they only have a life interest in (for example, for a serious operation), the trustees can ‘appoint’ (pay out) the asset to the survivor if they agree.

Law firm April King has been advocating this type of structure for years: it is completely legitimate because neither party is depriving themselves of assets. They are just ensuring that they do not end up paying for care that they never received. It can also be fully compliant with the requirements for the Residence Nil Rate Band, provided that any Qualifying Residential Interest (e.g. a share of the family home) is gifted to lineal descendants (e.g. children, grandchildren) directly or into one of a limited number of trusts, following the death of the survivor.

UPDATE: Please see my commentary ‘Why you should still be worried about care fees‘. and my more recent blog post on deprivation of assets, ‘Avoiding care home fees: is it possible?‘.

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