The prospect of having to sell the family home to pay for care costs is a concern for many older homeowners and their families. The rules around care funding are complex and the options for managing the impact of care costs on property wealth require careful planning, ideally well in advance of care becoming a need.

How Care Funding Works

Local authorities in England carry out financial assessments to determine how much individuals must contribute to their own care costs. If a person's assets, including property, exceed the upper capital limit of one hundred thousand pounds as of 2023, they are expected to fund their own care in full. Below a lower capital limit of around seventeen thousand pounds, the local authority funds care costs. Between the two limits, a sliding scale of contribution applies.

The property is not automatically taken by the local authority, but its value is included in the financial assessment and the individual is expected to use it to fund care. This assessment means that for most homeowners with a mortgaged or owned home, they will be expected to contribute significantly toward care costs.

The Deferred Payment Agreement

A deferred payment agreement allows a person in a care home to delay paying their care costs, with the local authority recovering the debt from the property when it is eventually sold. This means the house does not have to be sold immediately when care begins; the sale and cost recovery happen when the property is sold, typically on the person's death or when they choose to sell. This is the main formal mechanism for avoiding an immediate sale and is available as a right where the local authority is funding care and property is the main asset.

Transferring Property Before Care Is Needed

Many people consider giving their home to their children or other family members well before care might be needed, in the hope that this will exempt the property from care cost assessments. This approach is legally risky. Local authorities assess assets that have been disposed of deliberately to avoid care costs as a notional asset, treating them as if they were still owned. This is known as deliberate deprivation of assets. If the local authority concludes that property was transferred with the intention of avoiding care costs, it can still include the property value in the financial assessment and in some cases seek to recover costs from the person who received the asset.

Care Annuities

Immediate needs annuities, also called care fees annuities, are insurance products that pay a guaranteed income to cover care costs in exchange for a lump sum premium. The lump sum might come from property equity released when downsizing rather than entering care, creating a position where ongoing care costs are met without further recourse to remaining assets. These products require specialist financial advice.

Summary

There is no certain way to avoid property being used to fund care costs if care is needed. Deferred payment agreements delay sale without avoiding it. Deliberate deprivation of assets is assessed by local authorities and may not achieve the intended outcome. Care fees planning with a specialist financial adviser, ideally years before care might be needed, provides the best opportunity to manage the impact of care costs on property wealth within the legal framework.