Can You Protect Your Home from Care Fees?

This is one of the questions I am asked most often, and I understand why. People have worked hard for their home, they have paid off a mortgage over thirty years, and the thought of the whole value going on care fees troubles them. They want to leave something to their children. So they ask me, quite reasonably, whether there is a way to protect the house.

There is honest planning that may help, and I will explain it. But I want to be straight with you from the start. Anyone who tells you there is a simple scheme to make your home vanish from a care assessment is not being honest with you. The rules are stricter than that, and getting it wrong can leave you worse off than doing nothing. Let me take it slowly.

How care fees are means-tested

If you need residential care in later life, the local council will carry out a financial assessment, usually called a means test, to work out how much you have to pay towards it. It looks at your capital, which includes savings, investments and, in many cases, the value of your home.

In England there is an upper capital limit. If your assessable capital sits above it, you pay for your own care in full. That figure is currently £23,250, though these thresholds are reviewed from time to time, so please check the current figure before you rely on it. Below the limit you begin to receive some help, on a sliding scale, until your capital falls to a lower threshold.

Your home is not always counted. If your husband, wife or certain other qualifying people still live there, its value is usually disregarded. The difficulty tends to arise on the second death, or when the surviving partner goes into permanent care and the house is empty. That is the moment families worry about, and it is the moment good planning is aimed at.

The worry about losing the family home

Picture a married couple who own their home together, in the ordinary way, as joint tenants. When the first of them dies, the whole house passes automatically to the survivor. That is usually what people want, and there is nothing wrong with it.

But now the survivor owns the entire property. If, some years later, they need to go into a care home, the full value of the house can be assessed towards their fees. The half that once belonged to the first partner to die is no longer protected. It has become part of the survivor's estate, and it can be spent on care like any other asset. For a good many families, that is the whole inheritance gone.

How a property protection trust in a will can help

This is where a property protection trust can make a real difference. It is not a separate document you sign in a hurry. It is a trust written into each partner's will, and it changes what happens to the half shares of the home.

First, the couple own the home as tenants in common rather than as joint tenants, so each owns a distinct half. Then each will says that, on that person's death, their half share passes into a trust rather than straight to the survivor. The children are the ones who will eventually benefit from that half.

Here is the important part. The survivor is given the right to carry on living in the home for the rest of their life. They are not turned out, they are not unsettled, nothing about their day to day changes. But because the first partner's half is held in trust and not owned outright by the survivor, only the survivor's own half forms part of their estate if they are later means-tested. The half in trust may be protected and can pass to the children as intended.

I sat with a couple in Wellingborough a while ago who had put exactly this in place through their wills years earlier. When the husband died, his half of the house went into the trust for their two daughters. His widow lived on in the house, quite content, for another good stretch of years. When she later needed care, only her own half of the property came into the reckoning. The girls kept their father's share. That is the plan working as it should, and it was all set out quietly in two wills.

What this approach cannot do

I have to be even-handed here, because a trust of this kind is not a magic wand. It has real limits, and you should know them before you decide.

• It does not protect the survivor's own half of the home. That half remains theirs, and it can be assessed for their care in the ordinary way.
• It only works where two people own a property together. A single person living alone cannot use this structure to shelter their whole home.
• It is not a way to give your assets away. The trust arranges what happens to a share on death, through your will. It is not a device for disposing of things during your lifetime to keep them out of a means test.
• It does not reduce, remove or avoid the fees themselves. Care still has to be paid for. What it does is help decide whose money pays for it.

The danger of deliberate deprivation of assets

Every so often someone asks me whether they could just give the house to the children now, and be done with it. I understand the thinking, but I would urge real caution. There is a rule councils apply called deliberate deprivation of assets, and it catches a lot of well-meaning people out.

If a council decides you have given away money or property with the intention of avoiding care fees, it can treat you as though you still owned it. In other words, you can lose the asset and still be assessed as if you had it. There is no neat time limit that makes a gift safe after a set number of years, whatever you may have heard down the pub. The council looks at your intention and the timing, and it can look back a long way.

Giving your home to your children can go wrong in other ways too. If a child divorces, is made bankrupt or dies before you, the home you signed over can be dragged into their affairs. You could find yourself dependent on their goodwill to stay in your own house. This is why I never encourage people to hand the property over lightly, and why planning through a proper will is usually the more sensible route.

Why you must take advice before acting

Care fees planning sits where wills, property, tax and council rules all meet, and the right answer genuinely depends on your own circumstances. What suits a married couple with grown children may be quite wrong for a widow living alone, or for an unmarried couple, or for someone already close to needing care.

I should be plain about what we are. Choice Wills are will writers, and members of the Society of Will Writers. We are not solicitors and we are not financial advisers. I can talk you through a property protection trust in your will and how it works, and I will tell you honestly if I think it is not right for you. Where you need advice on care funding, tax or anything beyond a will, I will say so and point you towards the right professional. That is part of the job, and I would rather send you to the right person than pretend I am the right person for everything.

If you would like to understand your options properly, and you would like an honest view rather than a sales pitch, the best thing is to have a proper conversation about your own situation. You can read more about the way I approach later-life planning on our estate planning page, and then get in touch whenever you are ready.

Common questions

Can I avoid care home fees by putting my house in trust?

No, you cannot avoid care fees by signing your house into a trust to dodge them. A property protection trust written into your will may help protect the share belonging to the first partner to die, so it passes to your children rather than being used for the survivor's later care. It does not remove your own liability, and setting up a trust with the main purpose of avoiding fees can be treated as deliberate deprivation of assets.

What is a property protection trust?

It is a trust written into each partner's will. When the first partner dies, their half share of the home passes into the trust for the children rather than to the survivor outright. The survivor keeps the right to live in the home for the rest of their life. Because that half is held in trust, it does not form part of the survivor's estate for a later means test.

Will the council take my house to pay for care?

The council does not take your house, but the value of your home can be counted in a means test if you move into permanent residential care and no qualifying person, such as a spouse, still lives there. If your assessable capital is above the upper limit, currently £23,250 in England, you pay for your own care. Always check the current figure and take advice on your own position.

What is deliberate deprivation of assets?

It is when someone gives away or reduces their assets with the intention of avoiding care fees. If a council decides you have done this, it can carry out the means test as though you still owned the money or property you gave away. There is no simple time limit that makes a gift safe, so giving your home to your children to avoid fees can backfire.

Should I give my house to my children?

I would be very cautious. Giving your home away can create problems with care fees, tax and your own security, and it can be treated as deliberate deprivation of assets. There may be sensible planning open to you, but it needs proper advice first. Choice Wills are will writers, not solicitors or financial advisers, so we will point you to the right professional where you need one.