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The care home fee trap

Paul Lewis / 06 October 2017

The fear of having to sell a home to pay for care is being exploited by commercial firms offering risky schemes to shelter homes from means-testing. Don’t fall for them. There are other, perfectly legitimate ways to preserve the value of a family home.

House with For Sale sign outside
You don't have to sell the family home to pay for care home fees – there are other, perfectly legitimate ways to preserve its value.

When someone moves in to a care home, the local authority assesses their income and capital assets – the means test. If the capital is more than £23,250 (£26,500 in Scotland, £30,000 in Wales), then care-home fees have to be paid, though in Scotland everyone gets some care costs covered. The value of a house or flat will exceed that amount, which is why many people think they will have to sell their home to pay the fees.

Avoidance schemes

Some firms make a lot of money selling schemes to protect the value of a home from the means test, and claim that tens of thousands of people are forced to sell their homes to pay for care. This is not true, though of course some do. The schemes are usually sold at meetings in hotels and other venues to crowds of anxious people in their sixties and seventies.

These schemes cost thousands, even though they probably will not work. They are based on putting your home into a trust – a legal device so the property is owned not by you but by the trust. The theory is that, as you no longer own your home, it will escape being counted as an asset when the means test is applied.

However, this wheeze is defeated by a rule called ‘deliberate deprivation of assets’. If you take any steps to get rid of what you own, and part of your motivation is to increase your entitlement to help from public funds, then the asset can still be counted as yours. In other words, even if your home is owned by a trust, the local council could count it as if it is yours and refuse to pay your care-home fees. Buying a scheme of this sort is money down the drain – or rather commission into the pocket of the person who sold it to you. The firms selling these schemes are unregulated and there is no one to go to should you wish to make a complaint.

Most people who buy such a scheme will never find out whether it works or not. The great majority of people do not go into a care home. They die in their own home or in hospital.

Legitimate ways to keep your home

The truth is that no one has to sell their home to pay for their care while they are alive.

First, if your spouse or partner lives in your house or flat then its value is ignored anyway. That is also true if a relative over the age of 60 lives there or a younger disabled person who has been a dependant. If your previous carer continues to live there, the local council can also ignore the value and often will.

Second, the NHS may pay the entire cost of the care home. It is called ‘continuing health care’ and should happen if your primary need for care is a medical one. Of course, a cash-strapped NHS will not always fulfil its obligations easily, but last year 28,600 people in England did have their care-home fees paid in this way. Alternatively, you may get an NHS-funded nursing care contribution towards the cost.

Third, even if none of these apply and you have to pay for your care, you do not need to hand over any money while you are alive. In England, if you have less than £23,250 in savings – apart from the value of your home – your local council must let you defer the payment. The unpaid fees clock up until you die and the money, plus some interest, is then repaid from your estate. Meanwhile, your home can be rented out and the income used to help pay your fees. If you have more than £23,250 in savings, you can pay your fees out of that and when your savings fall to that limit you can get a deferred-payment agreement. Outside England there is no legal right to defer but local authorities will normally allow it. Deferment is expensive for the council, so you may have to insist on it.

Could you get financially subsidised social care?

Pay anyway

If your home is empty, then of course you may choose to sell it and pay your own fees in order to get the quality of care you want. If you rely on the council, you may find the choice and the conditions are limited. Even if the council does pay your fees, relatives can top them up – if they can afford to – so you can get a better standard of care.

Another option is to buy an Immediate Needs Annuity. This will pay the shortfall between your income and the cost of care. Typically you’ll pay around £130,000 for a guaranteed £2,500 a month for life, which can be inflation- linked. It can cost much more or much less than that, depending on individual circumstances. It’s imperative you buy one only through a regulated financial adviser.

People who pay their own care-home fees (self-funders) – and there are more than 170,000 of them – pay higher fees for the same care as people whose fees are paid by the council. Healthcare intelligence company LaingBuisson estimates local councils pay £486 a week for residential care that would cost self-funders around £700. This is because the councils refuse to pay care homes the sums they claim they need, with the result that self-funders subsidise their costs.

For more information, contact Money Advice Service 0800 138 7777 or  Independent Age 0800 319 6789. Or ring Saga’s Care Funding Advice line on 0800 096 8703.

Help your loved ones keep their independence at home with Saga SOS Personal Alarm service, part of Saga Healthcare. No start-up costs, no delivery charges and the first month is FREE. Find out more here


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The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.