Trusts for care home costs

Trusts for care home costs

Neglecting to act promptly may result in your home being sold to cover long-term care expenses, wiping out your assets. Any income you receive could be diverted towards care costs, jeopardising your children and grandchildren's inheritance.



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Understanding Care Costs

Many of us dedicate years of hard work to secure our homes and accumulate savings for retirement, often with the hope of leaving a legacy for our children and grandchildren. However, the prospect of moving into a care home poses a significant financial challenge. The associated costs can swiftly deplete one's savings, potentially leading to the sale of the family home to cover care fees. This could drastically reduce, or even entirely erase, the inheritance intended for loved ones.

Upon entering care, individuals undergo means testing, wherein all assets, including the family home, are taken into account. Unfortunately, only those with minimal assets may escape the financial burden of care costs.


Safeguarding Your Assets

So, what can be done to protect your assets?


1. Protecting Your Home


The first step is to examine how you currently own your home. Most individuals own their homes jointly, meaning that upon the death of one partner, the survivor inherits 100% of the property value. However, this leaves the home vulnerable to potential care costs.


By transitioning to a 'Tenants in Common' ownership structure, coupled with appropriate trust planning, you can effectively shield your property from care costs should either partner require care.


2. Securing Other Assets

Similarly, restructuring the ownership and investment of liquid assets such as bank accounts and savings can offer protection from care costs. Our team of qualified advisers can provide tailored guidance to ensure comprehensive protection for all your assets.


Understanding Care Payment Thresholds

Care payment thresholds vary depending on the value of your assets. Individuals with assets exceeding the upper limit (£23,250, including property, cash, and investments) are required to fund their care entirely. Financial assistance from the local council is only available once savings/assets have been reduced to the upper limit.


For those with assets below the lower limit (£14,250), care costs are determined solely by income, with assets disregarded. It's important to familiarise yourself with these thresholds to plan effectively for potential care costs.


Preventing the Sale of Your Home

One of the most effective ways to safeguard your property is to adjust the way it is owned. While joint tenancy may be common, it can leave the property vulnerable to care costs and inheritance tax liabilities. Severing the tenancy and establishing 'Tenants in Common' ownership, alongside setting up mirror wills, ensures that your home is not lost to care costs.


Protecting Other Assets


Assets such as cash, stocks, and shares are also subject to assessment for care costs. By restructuring ownership and investment, you can shield these assets from assessment. It's worth noting that certain assets, such as family life insurance policies, may be excluded from care cost assessments.


Navigating Regional Variations


Care payment thresholds vary by region, impacting the extent of personal contributions required. By understanding these variations, you can effectively plan for potential care costs.


Long Term Care Capital Thresholds


You will be required to pay for all of your own Care if your assets are greater than:

England: £23,250
Wales: £30,000
Scotland: £26,500 (From June 2017)
N. Ireland: £23,250 (April 2017 – 2018)


You will be required to pay for some of your own Care if your assets are between:

England: £14,250 – £23,250
Wales: £30,000 – £30,000
(The Upper and Lower Limits are the same)
Scotland: £16,500 – £26,500
N. Ireland: £14,250 – £23,250


Is there a limit on care home expenses?

Presently, there is no ceiling on care home charges in the UK.

However, the UK government has unveiled that starting from October 2025 (initially slated for 2023 but delayed), individuals in England will not be required to exceed £86,000 in care expenses throughout their lifetime. Upon reaching this threshold, ongoing care expenses will be shouldered by the local authority. Additional details can be found here.

The rationale behind this limit is to halt the necessity for homeowners to sell their residences to cover care costs.

Nevertheless, essential daily living expenditures such as accommodation, food, and energy bills at care homes will remain uncovered.

As per the outlined scheme, individuals possessing capital ranging from £20,000 to £100,000 will contribute towards their social care expenses based on a progressive scale.


Final Thought

The introduction of a care cost cap represents a significant milestone in the ongoing effort to address the financial challenges associated with long-term care in the UK. By providing a measure of financial protection and alleviating the need for individuals to sell their homes to cover care costs, this initiative offers hope and reassurance to countless individuals and families facing the prospect of aging and increasing care needs. However, it's crucial for individuals to remain vigilant and informed, recognising the scope and limitations of the cap, and planning accordingly to ensure financial security and peace of mind in their later years.


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