When applying for Local Authority funding for care home fees, how much of your property is included as an asset depends on who you own it with and whether they will keep living there.
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At a glance
- When you move to a care home, your Local Authority does a financial means test to see if you can afford to pay privately or if they will pay your care home fees for you.
- If you jointly own a property with your partner, the value of the property will not be considered if your partner will remain living there.
- ‘Gifting’ your property to your children does not have the same ‘7 year rule’ as inheritance tax. It could be considered a deliberate deprivation of assets.
How is funding for my care calculated?
If you are applying for funding towards your care, the local authority will conduct a means test. This is to establish how much funding you are eligible for. This is when they add up your capital, which is your assets, savings and investments, and your income. How much this total comes to determines whether you are eligible for full or partial funding. If not, it means you have enough money that you must pay privately.
To be required to self-fund your care home fees, your total capital must be valued above:
- England: £23,250
- Scotland: £35,000
- Wales: £50,000 (for residential care)
In order to qualify for local-authority funding, your total capital must be valued below:
- England: £14,250
- Scotland: £21,500
- Wales: £50,000 (for residential care)
To qualify for partial funding, your total capital must be valued between:
- England: £14,250 and £23,250
- Scotland: £21,500 and £35,000
Are jointly-owned properties included in the means test?
If your partner still lives there
If your partner is still living in your jointly owned property, it will not be included in the means test which determines whether you pay care home fees.
Separated but still living together
People who are separated or divorced, but still living together, will find the property will be included in the means test, unless they also care for your child (who is under 18), a relative who is over 60 or a disabled relative. The person they care for must also live in the property for it to be excluded from the means test.
Staying in a care home temporarily (respite or convalescence)
The property won’t be counted if you are going to a care home temporarily. Also it won’t be counted if you are having a means test because you want to receive home care.
Separated and not living together but you jointly own the property
If you have separated from your partner and no longer live together, but still have equal shares in the property, you will be considered to have half of what the property is worth.
So, if you and your spouse own a house worth £300,000, and the mortgage is fully paid off, you will be considered to have £150,000 in assets for the house alone.
If the shares are unequal then your assets will be calculated accordingly.
Can my partner still live in our jointly-owned property?
If your property isn’t included in the means test, your partner will be able to continue living there. If it is included, it may be necessary for them to move, depending on the individual circumstances.
12-week disregard period
You will have a 12-week disregard period, starting from the day you move into a care home. For these 12 weeks, your share in the property won’t be taken into consideration for your care fees funding.
This gives you time to decide what to do with the property, such as putting it on the market or getting a landlord licence and finding tenants.
Deferred Payment Agreement
You could also apply for a Deferred Payment Agreement (DPA). This is an agreement with your local authority whereby they take money owed to them from the sale of your home.
This allows you to delay using this asset to pay for your care, often until after your death. You will have to pay administration fees for this, and interest does accrue over time.
Not everyone is eligible so if you are interested in applying for a DPA, speak to your local authority.
Can I give my home to my children?
Some people believe that signing the deeds of their home over to their children is a good way to avoid inheritance tax and having to pay privately for care home fees.
You are within your rights to give away your home, but the local authority may see this as a deliberate deprivation of assets. In this case, they will still count the property as part of your assets when calculating your funding, even though you now cannot use them.
This is something you should be very careful with,. It may cause problems if you need the money you are considered to have to pay for your care home fees, but it is now in the hands of your children.
Risks of giving property to your children
If your children are not willing to sell the property and use the money for your fees, they are within their legal rights and can keep it, meaning that you will likely have to move to a lower-budget care home.
Also, if they go bankrupt or get divorced, that home is part of their assets. They could lose it before they would have inherited it anyway, had you not given it to them early.
Furthermore, if the property is worth more than £325,000, you need to survive for seven years after you sign it over for it to no longer count as part of your taxable estate.
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