Written by David, Estate Planning Consultant
How to Protect Your Home From Care Fees
Long-term care costs are one of the biggest financial risks facing older homeowners. This guide explains how care fee assessments work, when your home is at risk, and what planning options are available.
In this guide
How care fees work
Residential care in the UK is means-tested. If you need to move into a care home, the local authority will assess your assets to determine whether you must fund your own care, make a contribution, or receive full funding.
In England, the current thresholds are: above £23,250 in assets, you fund your own care entirely (known as self-funding). Between £14,250 and £23,250, you make a contribution based on a sliding scale. Below £14,250, the local authority pays. These thresholds have been broadly unchanged for many years.
Care home costs in Kent typically range from £700 to £1,500 per week depending on the level of care required and the type of home. For someone who requires care for several years, the total cost can easily exceed £200,000 — and sometimes much more.
The financial assessment considers all assets: savings, investments, property (in some circumstances — see below), and income. The aim is to ensure those who can afford to pay do so, before public funding is provided.
When your home is assessed
The family home is not automatically included in the means test. There are important circumstances in which it is disregarded:
- A spouse, civil partner, or partner lives in the property
- A relative aged 60 or over lives there
- A dependent relative lives there
- A child under 18 lives there
- During the first 12 weeks of a permanent care placement (the 12-week property disregard)
If none of these exemptions apply, the property value is included in the assessment after the 12-week disregard ends. At this point, the local authority may require that the property is sold to fund care costs. A deferred payment scheme can allow costs to be repaid from the estate after death rather than requiring an immediate sale.
Where one partner enters care while the other continues living in the home, the property is disregarded for as long as the other partner remains there. The problem arises when both partners need care, or when one partner has already died and the survivor enters care alone.
Protective property trusts
A protective property trust (also called a property protection trust or nil rate band discretionary trust) is a trust created within a will. It is designed to preserve the deceased partner's share of the family home when the first partner dies.
For this trust to work, the home must be owned as tenants in common — each partner owning a defined share. When the first partner dies, their share passes into the trust rather than outright to the survivor. The survivor retains the right to live in the property and can benefit from the trust, but does not own the deceased's share outright.
Because the deceased's share is held in trust rather than owned by the survivor, it is not included in the survivor's estate when they later enter care. This means the trust fund is protected from the care fee means test — potentially preserving a significant portion of the property's value for the children.
For example, if a house is worth £500,000 and owned equally, the deceased's £250,000 share passes into trust. If the survivor later enters care, only their own £250,000 share is assessed — not the trust fund.
Important note
Protective property trusts must be properly established — the property must already be held as tenants in common. If you own as joint tenants, the first step is to sever the joint tenancy. This is straightforward to arrange alongside will preparation.
It is also worth noting that a protective property trust does not give absolute protection. If the local authority can demonstrate that the primary purpose of the trust was to avoid care fees (and the trust was set up when care was already foreseen), they may challenge it under deprivation of assets rules. Setting up a trust when both partners are fit and healthy and as part of comprehensive estate planning is the safest approach.
Lifetime planning strategies
Beyond will-based planning, there are several approaches to managing care fee risk during your lifetime — though each comes with important caveats.
Lasting Power of Attorney: Ensuring that financial LPAs are in place for both partners is essential. If you lose mental capacity without an LPA, no one — including your spouse — can legally manage your financial affairs without a court-appointed deputy, which is slow and expensive. An LPA allows a trusted attorney to manage finances if needed.
Lifetime gifts: Making gifts to children or others can reduce the estate over time, but gifts made with the intention of reducing care fee liability will be treated as deliberate deprivation of assets. Gifts made well in advance and for genuine reasons — such as helping a child buy a home — are less likely to be challenged.
Equity release: Some homeowners use equity release to fund care or other needs. Specialist independent financial advice is essential before taking this route.
Care fee annuities: An immediate needs annuity (also called a care fee annuity) pays directly to the care home and is free of income tax. It can provide certainty of funding for those already in care. Again, specialist advice is needed.
Common myths about care fees
Myth: If I give my house to my children now, it won't be counted
Fact: Local authorities can look back at asset transfers and apply deprivation of assets rules. If the transfer was made to avoid care fees, the asset can still be counted in the assessment.
Myth: My home is always protected if my spouse lives there
Fact: This is partially true — the home is disregarded while a spouse remains in it. But if the spouse also enters care or dies, the protection ends.
Myth: The government will pay for everyone's care eventually
Fact: Care funding reforms have been repeatedly delayed. Current rules remain means-tested and are unlikely to change significantly in the short term.
Myth: A power of attorney lets someone control my money now
Fact: A financial LPA only comes into effect when needed (either on registration or when you lose capacity, depending on how it is drafted). Simply having an LPA does not give anyone access to your assets today.
Care fee planning is a complex area. At Legacy Lines we can discuss the options available to you, including protective property trusts and the importance of lasting powers of attorney as part of a broader estate plan. Get in touch to arrange a conversation.
Frequently asked questions
Can a protective property trust protect my home from care fees?
A protective property trust can help preserve the deceased partner's share of the family home when the first partner dies. However, the surviving partner's share remains in their estate and may still be assessed for care fees. It does not guarantee full protection.
At what level of savings do you have to pay for care?
In England, you are currently required to fund your own care if your assets (including the value of your home in some circumstances) exceed £23,250. Between £14,250 and £23,250, you make a contribution. Below £14,250, the local authority covers the cost.
Is transferring your home to your children to avoid care fees legal?
Local authorities assess whether assets were deliberately transferred to reduce care fee liability under deprivation of assets rules. If a transfer is found to have been made with the intention of avoiding care fees, the local authority can still treat the assets as belonging to you when calculating your contribution.
Is the family home always counted in a care fee assessment?
No. Your home is disregarded in the means test if a spouse, civil partner, dependent relative or a relative over 60 continues to live there. The home is also disregarded for the first 12 weeks of permanent care.
When is the best time to start care fee planning?
Early — ideally before care needs arise. Planning well in advance of any health deterioration gives the most options and avoids the risk of transfers being challenged as deprivation of assets. Will-based planning such as a protective property trust takes effect on death, making it a sensible step for many couples.