Covering the cost of care is no joke. The average cost of residential care across the UK in 2020 came in at a whopping £34,944 a year, rising to an astonishing £48,720 a year when nursing care was included.
With figures like these, it’s little wonder that homeowners are looking at ways in which they can avoid selling their homes to pay for care, especially those who wish to leave the family home to their children. Question is, can it be done? Today’s post aims at answering that for you.
Is it really possible to avoid selling your house to pay for care?
Let’s get straight to the point and answer the big question: Can you avoid selling your house to pay for care?
The most honest answer is...it depends. In some instances, you can indeed avoid selling your property to pay for care, but not always.
One of the biggest concerns people who find themselves in this situation have is leaving dependants without a place to live. Thankfully, no local authority will make your spouse homeless in order to pay for your care, and the same applies for other qualifying dependants who live with you, such as:
- Civil partners
- Unmarried partners
- Close relatives under 16 who you are legally responsible for
- Close relatives who are over 60 or incapacitated
- Ex-wives, husbands, or partners, if they are a single parent
You can also avoid selling your home to pay for care if you choose to stay put and receive the care you need in your own home. In short, you will only need to sell your house to pay for care if you need residential care and there are no qualifying dependants living with you.
Can I get financial assistance to help cover care fees?
Maybe, but certain criteria needs to be met in order for you to qualify. As everybody has different circumstances to take into account, you will have to undergo a ‘means test’ to determine whether or not you are entitled to help with care costs.
How does means testing work and what are the thresholds?
Means testing works by looking at both your income and your capital. Income can take the form of earnings, benefits, or pensions, while capital is classed as investments, savings, and assets, such as property or land.
As we discovered above, however, if you still live in your home, or have qualifying dependants who do, then the value of the property will not be included in the means test.
If you require permanent residential care, then the value of your property will be counted as capital after 12 weeks. This 12 week period is to allow you time to sell up or arrange alternative ways to pay, such as a deferred payment agreement set up with your local council.
It’s also worth noting that those who jointly own property and move into residential care permanently may also have the value of their share counted towards their means test.
Once your ‘means’ have been calculated, they will be checked against the national thresholds, which, for 2020/21, are as follows:
England: Upper Savings Threshold - £23.250; Lower Savings Threshold - £14,250
Wales: £24,000 (care at home) or £50,000 (care in a care home) for both thresholds
Scotland: Upper Savings Threshold - £28,500; Lower Savings Threshold - £18,000
Northern Ireland: Upper Savings Threshold - £23,250; Lower Savings Threshold - £14,250
The differences between means testing for residential care and receiving care at home
Moving into a care home and receiving care in your own home are means tested differently.
For those who require residential care and have more than the upper threshold in terms of capital, they will usually be expected to pay for their own care.
Anyone whose capital falls between the two thresholds will be assessed taking ‘tariff income’ (sometimes referred to as ‘assumed income’) into account. This will be assumed at £1 for every £250, or part of £250, above £14,250.
If your means tested capital falls below the lower threshold, then that capital will be disregarded, as no assumed income can be included in your financial assessment.
The care at home means test works in exactly the same way as above, but with two key differences:
- As you will continue living there, the value of your property is not taken into account when calculating your capital.
- The income you are allowed to keep will be significantly higher, which will allow you to take care of household bills and living expenses.
It’s also worth bearing in mind that there may be slight differences between local authorities, so always double check before you proceed. You can find out more by visiting your LA’s website, which can be found via gov.uk.
Equally, there are national differences to consider as well. Scotland, for example, offers free care services up to a certain limit and Wales has an upper level cap on what you will be expected to pay.
Paying for care: Alternatives to selling your home
If you are deemed able to cover the cost of your care, but would rather not sell your home, there are a few alternatives you could consider:
- A deferred payment agreement with your local council
- Immediate needs annuities from an insurer
- Equity release to free up money from your home (see our equity release guide for more info)
- Renting out your home rather than selling it (check out our guide for new landlords)
Can I give my property away to avoid care fees?
If whether or not you pay for your care rests largely on the assets you hold, wouldn’t it be a good idea to transfer home ownership with a deed of gift to lower what appears in your capital column?
Well, yes...if it worked!
Unfortunately, the government saw that one coming, and they’ve put measures in place to stop people doing just that. Giving your home to, say, your children could be seen as a ‘deliberate deprivation of assets’, and the value of the property could still be added to your means test.
Will loved ones be forced into paying for my care needs?
Shared wealth is counted as part of your means test. So, if you hold property jointly with your spouse, this will be included. If, on the other hand, your spouse has assets held solely in their name, these will not be included in your means test.
Now, that lightbulb above your head telling you it’d therefore be a good idea to transfer everything across to your partner should be ignored: this, too, would be classed as deliberate deprivation of assets.
Sorry about that.
What about your children? At present, any assets held by your children are deemed as separate from your own, so they are never included in any means testing you may have to undergo.
What circumstances make selling your home to pay for care unavoidable?
Contrary to popular belief, the only time you will be expected to sell your home to cover the cost of care is when you permanently move into a care home and no longer have any qualifying dependants living in your property.
If you are lucky enough to have savings or a decent pension, you may be able to avoid selling your home altogether, but with fees currently standing at £35,000 per year on average, this is beyond the reach of most of us.
Plan ahead: Getting advice on receiving affordable care without selling your house
Our final piece of advice to close this post with is this: act early. Planning for eventualities, such as requiring residential care, sooner rather than later is far better than burying your head in the sand and pretending it’ll never happen.
Remember the deliberate deprivation of assets we spoke about earlier? This becomes null and void if you reduce your savings and assets early enough. If, for example, you gift your property to your children when you are fit and well, and you have no inkling of needing care or support at the time, the chances of being challenged on deliberate deprivation of assets becomes much slimmer.
Speak to an independent financial advisor who works specifically on long-term care funding to discuss your personal needs. This is definitely one area of life where it pays to plan ahead.
Petty Son and Prestwich is an estate agency with a difference. Established back in 1908, we’ve stood the test of time and continue to flourish despite growing competition. Why? Well, that’s for you to decide!
Regardless of whether you’re buying or selling, renting or letting, give our friendly team a call to find out why we’re still Number 1 in E11 and beyond.