How To Avoid Paying Too Much In Care Home Fees [Blog]

Paying For Care Home Fees

How you pay for care home fees will be changing in October 2023. Plan ahead now – or you could end up paying more than you need for care.

You can set up a trust to protect some or all of your assets so they don’t have to go towards funding care for you or your loved ones.

Trusts are not just for people with substantial assets. And they don’t have to be complicated. But it pays to take expert legal advice from a solicitor who specialises in trusts, wills and probate.

Existing Care Home Funding Rules – What’s Happening Now

UK care home fees currently average £704 per week; nursing home fees average £888 per week.

Councils carry out means tests to see if you have enough money to pay for your care. These means tests can be very thorough. Local authorities take a dim view if they believe people are being unfair to the taxpayer when it comes to avoiding care home fees.

Here are the thresholds:

Over £23,250 of assets – you must pay the full fees. This is called ‘self-funding’.
£14,250 to £23,250 – you must contribute from income included in the means test. This could include your pension(s). It could also include an assumed, or ‘tariff’ income based on your capital between £14,250 and £23,250. The council will pay the remaining cost of your care.
Less than £14,250 – you no longer have to pay a tariff income based on your capital. But you must continue paying from income included in the means test. The council will pay the remaining cost.

Funding Care Home Fees After October 2023 – What’s Changing

From October 2023, funding for care homes and nursing homes is changing: there will be an £86,000 cap on care fees. Funding limits will be relaxed so anyone who has assets below £20,000 (rather than the present £14,250) will not have to contribute.

State funding will be made available to help those who have savings up to £100,000 (as opposed to £23,250).

Assessments will be made through an independent personal budget. This will be tracked through annual reviews in a person’s care account.

Once you reach the £86,000 cap, you will receive free care and support. But it’s important to note that this cap will exclude your care home daily living and accommodation costs. So the £86,000 headline figure is a ‘red herring’: it covers only the cost of your actual care…not food and accommodation.

What The Care Funding Changes Will Mean For You

People with more than £100,000 in chargeable assets income will pay for care in full until they become eligible (when their assets drop below £100,000).
Assets between £20,000 and £100,000 – you would pay up to a limit of 20%. You would pay what you can afford from income, plus a means-tested tariff contribution from assets. This tariff is calculated as follows: for every £250 of capital between the lower and upper limit, an income of £1 a week is assumed. This will be payable towards the cost of your care.
Assets below the £20,000 threshold – you will no longer contribute from your assets and only what you can afford from your income.

It is likely that the biggest savings will be for those with assets between £20,000 and £100,000. But these days, that’s not a great deal – not when the average UK property now costs more than £250,000.

By the time you get to the age when you need rest home or nursing home care, your assets could be quite significant – and therefore are likely to get picked up by the means testing.

Here’s what you can do about it…

Protecting Your Assets With A Life Interest Trust

One way for couples to ringfence assets so that they’re not counted towards care home costs is to create life interest trusts in your wills.

How does a life interest trust work? Like this…

The trust beneficiary life tenant named in the will – typically a spouse or civil partner – can use the property during their lifetime.

When they die, ownership passes (as per the provisions of the will) on the end of the trust, typically to the children of the deceased.

So you can leave a house to your spouse to live in after you have died. And when they die, ownership of the property then passes to your children.

But there are important legal considerations:

You and your spouse/partner would need to hold the property as tenants in common. This means that instead of the property passing to each other automatically on death (which happens when you hold the property as joint tenants), the share of the property held by the deceased, passes as per their will.
Therefore, it is very important that people who own a property as tenants in common have wills in place. Without them, the property would not pass automatically to the surviving owner – because there’s no automatic legal right of survivorship in this instance!
Holding the property as tenants in common is important if you wish to create life interest trusts. If you do not hold the property as tenants in common, all is not lost as joint tenancy can be severed.

A life interest trust ringfences at least half the value of the property against care home fees – if the property is owned 50:50 as tenants in common.

If the property is owned 50:50 as tenants in common, then the half that is held in trust will not be considered when funding care for the surviving owner.

The whole value of the property can also be ringfenced if the person who has created the trust owns the property in their sole name.

Find out more here about trusts.