18th November 2019
Care Costs – Will You Have To Sell Your Home?
Many people are concerned about the cost of their care in later life. The average fee for staying in a care home is £600 a week (plus the cost of any nursing care required). The average stay in a care home is 130 weeks. Some simple maths tells us that this leads to a total average bill of £78,000.
Who pays for your care costs?
The issue everyone is concerned about is who will pay these very high fees, which tend to come right at the end of life. The answer is that it’s you – if you have more than £23,500 in property or savings. That’s the figure if you live in England. If you live in Wales there’s a more generous provision, and you don’t pay all the costs unless you have more than £50,000 in property or savings.
If you have less than £23,500 (or less than £50,000 in Wales), you pay only a proportion of the costs, and the local authority pays the rest. If you have less than £14,250 you pay nothing – the local authority pays it all.
If you need to move to a care home, the local council will carry out a means test to assess the value of your assets, including the value of your home, savings, property, investments, pensions and any benefits. It will then notify you how much it will contribute to the costs, and how much you will have to pay.
One point to note is that if you only need care on a short-term basis and will return home afterwards then your home won’t be included in this assessment.
Will you have to sell your home?
Because the value of your home is taken into account in the assessment of your assets, then in theory you might have to sell your home to pay care home fees. For some people, this is not a problem: if they’re moving from their own home to a care home, then they don’t need their own home any more, and there is no reason not to sell it.
But more common is the feeling that your home is something you work hard to buy over many years, and you don’t want it sold towards paying care costs. You would prefer to leave it to your family.
Sometimes the sale of your home to pay towards your care fees cannot be avoided. However many local authorities will bear the care costs upfront and defer your contribution, to be repaid after you have died or the property is otherwise sold. The local authority would put a charge on your home, and when it is sold (or after you die) the fees will be paid.
Can you avoid selling your home?
Lots of people tell me that they want to take steps to avoid their home being sold to pay for care costs. They consider transferring their home to their children even while they are still living there. They theory is that if you don’t own the property, it can’t be used towards the fees.
But there are potential problems with this. First, the local authority might say it is a deliberate ‘deprivation of assets’ and hold you liable to pay towards care costs anyway. Second, what happens if you never do move to a care home? Your home would no longer belong to you and you could be forced to move out. However unlikely it seems, if you fall out with your children, or they go bankrupt, or get divorced, you might find that someone tries to sell the house from under your feet. There are also implications for inheritance tax.
Ownership of your home and other assets, and whether it makes sense to transfer them, should always be considered as part of overall tax and estate planning.
To find out more about tax and estate planning, click here.