There is actually no law which says that if you own your house and have to go into a care home you will have to sell your house. What the law says is that if you go into a care home, you will be given certain allowances but will be assessed as to your ability to pay the fees. Examples of allowances are that the value of your house will be disregarded entirely for your first 12 weeks in a care home and it will also be disregarded if a dependant relative remains in your family house.
But your house is vulnerable. If you have capital over £23,000, you have to pay your care fees in full. Anybody owning a house will therefore exceed that threshold.
So if Social Services say you have to pay your fees, does it mean that your house will have to be sold? Not necessarily. You can put your pension or pensions, plus any other income, towards the fees, and maybe that will be enough. You could always rent out your house to provide some extra income.
But what happens if your combined income still results in a shortfall, and there is no dependant relative living in your house? I am afraid that unless you can pay the fees out of capital your house is a sitting duck. Its value will be taken into account and Social Services will expect you or your family to sell it, and to use the net proceeds of sale towards the care fees. This is what people are worried about.
There is a solution. Everybody is entitled to give their house away. There are “health warnings” which we have to give out, such as “what if your child has financial difficulties or turns against you?”. That tends to put a lot of people off. But how about putting your house in trust, with Trustees holding the house for the benefit of your children but with you having the right to live there for life? The value of the house cannot be taken into account because it is not yours, you are guaranteed a roof over your head for life, and an inheritance for your children is guaranteed. If Social Services prove that the principal reason you made the transfer was to avoid care fees, the transaction can be set aside. Also, it cannot be done if the house is mortgaged, and there may be Inheritance Tax considerations if you are worth over £325,000 (or £650,000 if you are a couple); but if you are healthy and unlikely to go into a care home within the next 6 months, then I think that taking specialist legal advice on the “Family Trust” option would be money well spent.
If you would like to discuss how to protect your family home, or how to set up a 'Family Trust', contact Simon Richardson on 01332 225 331, or by email - simon.richardson@smithpartnership.co.uk.
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How to avoid having to sell your home to pay care fees
