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Can I Avoid Selling My Home to Pay for Care?

If you’re reading this article, it’s likely that you know someone who needs to go into care (such as a parent) or it’s you that does. Whatever your situation, you have our sympathy because it’s never nice to feel that you have to sell a property in order to pay for much needed care. 

According to Carehome.co.uk, Nearly half a million people in the UK live in a care home and around half of these fund themselves (known as ‘self-funders’), whilst the other half receive local authority funding (albeit some people also pay a ‘top-up’).

How Much Does Care Cost?

Carehome.co.uk say that the amount you pay towards your care will depend on where you live in the UK. If you live in England and Northern Ireland and have assets of more than £23,250, you will have to pay the full cost of your care and be a self-funder. In Scotland it’s £28,750, whilst the care and care home fees threshold in Wales is £50,000.  

 Anyone with capital below these amounts will qualify for some financial support. If your savings or income fall below the threshold, the local authority should start paying for some or all of your care. You can ask the local authority to carry out a review while you are in residential care if your savings drop below the threshold or if they are about to, so that they can take over the funding of your care costs.  

Is There a Maximum Cost for Care?  

There is currently no cap on care home fees in the UK. However, in September 2020, the government announced that from October 2023, no one in England will have to pay more than £86,000 in care costs during their lifetime. Upon reaching this figure, the ongoing care costs will be paid for by your local authority.  

In April 2022, The Health Foundation – an independent UK-based charity – commented on what they called ‘crippling care costs’ and stated “MPs in Yorkshire, the Midlands and North East should vote down the government’s social care cap amendment to save their poorer constituents.”

The charity explains that: “The government proposed a cap of £86,000 on the lifetime care costs that people face. But it also proposed amending the 2014 Care Act so that local authority support that people receive to help them meet their care costs would no longer count towards the cap. This is a departure from the Dilnot Commission’s proposals, which significantly reduces the benefits of the reforms for people with lower levels of wealth. Those with housing wealth of more than £186,000 are unaffected. 

“The change means that, irrespective of wealth and assets, everyone is exposed to the same costs. £86,000 may be affordable for certain people, but it is a life changing amount for people with low to moderate assets and will still leave them with no choice but to sell their home to pay for their care.”

They add: “A joint Institute for Fiscal Studies (IFS) and Health Foundation report, funded by the Health Foundation, recently assessed the impact of the government’s amendment. It compared the financial effect of the change for people in different regions of the country. For example, for people spending ten years in residential care it found that:   

  • People in North East would spend an extra 6% of their assets on care, on average, as a result of the amendment. This is equivalent to an average increase in contribution of £5,700 
  • In Yorkshire and Humber people would spend an extra 5% of their assets, equivalent to £5,300 
  • In the Midlands it would see an increase in payments worth 4% of assets, equivalent to £4,600 
  • These increases compare to 2% in the South East and 1% in London, equivalent to £3,800 and £2,800 respectively  

Charles Tallack, Director of Data Analytics at the Health Foundation, said: “The government’s amendment represents a significant watering down of the pledge to protect people from catastrophic care costs. At a time when the country is facing the biggest hit to household finances since the 1950s, government should be looking to increase financial protection for poorer households. Yet this measure will disproportionally affect people with lower wealth and in poorer areas of the country. This is not levelling up: it’s unfair and a backwards step.” 

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 Meanwhile, Sally Warren, Director of Policy at The King’s Fund – an independent think tank, involved in work relating to the health system in England – commented: “The government’s change to the cap on social care costs is expected to save the Treasury money, but that saving comes at the expense of poorer people with lower levels of wealth and assets. Many of those people will be wondering why the Prime Minister’s pledge that no one will have to sell their home to pay for their care no longer applies to them, whilst wealthier people are still protected from catastrophic care costs.”   

How are Assets Currently Calculated so That I Know if I’ll Qualify for Assistance?

The value of your assets is calculated by adding up your investments, savings and the equity from your property. Your property won’t be included as an asset if your husband, wife, civil partner, close relative over the age of 60, or a dependent child or disabled relative lives with you.

In the means test, only 50% of any jointly held capital (such as a savings account), is counted. Some types of capital and income (such as certain disability benefits or pensions) are not included when you’re being means-tested for financial assistance. However, the means test will assume that you are in receipt of all benefits to which you are entitled (even if you’re not in possession of all of them).

If your home is included in your means-test, it will be disregarded for your first 12 weeks in a care home. Therefore, if your other capital assets and income are low, you may only become a self-funder after 12 weeks of care. 

Am I Entitled to Benefits?

If you are a self-funder, you’re over the age of 65 and you need care and support, you will be eligible to claim Attendance Allowance at £61.85 per week. If you need help during the day and night, or if you are terminally ill, this increases to £92.40 a week.

It’s not means tested and is paid to you tax-free. Importantly, Attendance Allowance isn’t available in care homes in Scotland because everyone over the age of 65 in Scotland is entitled to free personal care if they have been assessed as needing it by the local authority.

If you are under the age of 65 (and not in Scotland), you may be eligible for Personal Independence Payment (PIP). This benefit is replacing the Disability Living Allowance for people aged between 16 and 64. The PIP daily living component is paid to a person in a care home if they are paying for their own care and is £61.85 per week for the standard rate and £92.40 for the enhanced rate. 

In England, Wales and Northern Ireland, self-funders may also be able to get help with nursing care costs through Continuing Healthcare Funding (CHC) or Funded Nursing Care (FNC).

CHC is not means tested and pays for the cost of a person’s care; funding a person’s health and social care (personal care) needs as well as their care home accommodation. The care home, social worker or GP can arrange to have your nursing needs assessed to find out if you are eligible. CHC will pay for all your health care and as well as your personal care needs. To be eligible you must have a ‘primary health need’ and a care and support package will be put in place that meets your assessed needs.  

A person living with dementia may be eligible for NHS Continuing Healthcare Funding to cover the cost of their care. However, because people with dementia are often assessed as having social care needs rather than health care needs, they may be found to be ineligible.

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FNC is a flat rate contribution paid directly by the NHS to the care home towards the cost of the nursing care. The care home, social worker or GP can arrange to have your nursing needs assessed to find out if you are eligible. This money is only paid if a person who needs nursing care is in a care home that is registered to provide it. The NHS will pay a flat rate contribution directly to the care home towards the cost of the nursing care. FNC is a fixed amount each week paid to the nursing home. In England (at 11th May 2022), the rate is £209.19. It decreases to £179.97 in Wales, and £100 in Northern Ireland.

If you are a self-funder and paying all your own fees, which include nursing costs, FNC might be deducted from the total bill. However, different care homes have different approaches to this, and in some cases FNC may be paid to the care home in addition to the fees stated to you, to make it possible to cover the cost of additional care required. You should check your contract and speak to the individual care home to find out whether receiving FNC will reduce your bill.  

Meanwhile, if you’re eligible for state funding, your benefits such as a state pension or a private pension will be used to help pay for the cost of care. However, you will still need an income each week. This is called the Personal Expenses Allowance (PEA) and it’s a set amount you should be left with afterwards. The PEA for 2022/23 is: 

  • Wales: £33.99 (in Wales it’s called Minimum Income Amount) 
  • Scotland: £28.12
  • Northern Ireland: £28.01 
  • England: £25.65

This allowance is for personal items and will not be taken into account by the local authority when calculating how much you should contribute towards your care. English local authorities have the discretionary power to increase the personal expenses allowance in special circumstances such as if the resident has property-related expenses or is supporting a spouse.

Can I Sell My Home to a Relative in Order to Avoid Paying for Care?

When you’re being means-tested, the local authority will ask you about property ownership and bank statements. If you deliberately transfer ownership of your property into someone else’s name, or you move money into someone else’s bank account to avoid paying for your care, the local authority could refuse to fund your care because it’s deemed to a ‘deprivation of assets’.  

Bank statements that show you have quickly reduced your wealth before the assessment by purchasing expensive items could suggest a deliberate deprivation of assets to avoid paying for care provided by your local authority, including care home fees. 

 Other examples of potential deliberate deprivation of assets include:  

  • Gifting a lump sum of money to a family member or friend 
  • Transferring property into someone else’s name 
  • Selling a property to someone for less than it is worth 
  • Suddenly spending unusually large amounts of money 
  • Gambling 
  • Putting money into a trust 

As a ‘Self-Funder’, How Can I Pay for My Care Without Selling My Home?  

There are a number of different ways that self-funders can fund their care. If you don’t want to sell your home to pay for your care, you could rent it out if the rental income will cover the cost of your residential care. However, you should know that rental income is taxable. 

Alternatively, you could find out more about a deferred payment scheme. All local authorities in England, Scotland and Wales have to offer a deferred payment scheme to people living in residential care. In Northern Ireland there is no formal deferred payment system but it might still be available. The deferred payment scheme means the local authority will pay for your care while you are alive and then claim the money back through the sale of your property after you have passed away. Application for the deferred payment scheme is only possible if your savings are below the upper means test threshold.

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Local authorities can charge arrangement fees to set up the loan, as well as charge interest on the loan from the day it is set-up. Councils in Scotland often use charging orders instead of deferred payment agreements. This places a legal charge on a property ensuring the creditor is paid the money owed to them when the property is sold.

Another option is equity release. If you have a lot of equity in your home, you could consider raising the money for your care by mortgaging your property. However, with this option you will usually end up paying a relatively high level of interest which can make it an expensive way of paying for care. Not everybody is eligible for equity release. As well as the age restrictions (at least 55 years old for a lifetime house repayment or at least 65 for a home reversion plan), you must own a UK property that is your main residence, and it must be in a reasonable condition as well as being worth more than a predetermined value.

Also, if you have a house repayment or secured loan on your home, you could still get equity release, but it will depend upon the value of your home and the amount that is currently outstanding. Any outstanding amount will need to be repaid at the same time as taking equity release. For more on equity release, take a look at: Is equity release a viable option? Are there any equity release horror stories? 

Those Options Aren’t Viable for Me So I’m Going to Have to Sell My Home – What do I Need to Know?  

If you do need to sell your home in order to pay for your care, you could consider putting the cash from your sale into a high interest bank account. You’ll need to check the access rights you’ll have because high interest accounts usually lock your money away and you might need it to be accessible in order to pay your care home fees.  

When you do come to sell, it’s likely that you’ll need to sell quickly because you need to free up the money to pay for care. A company providing fast cash sales can be really useful because cash buyers work with motivated sellers to push through a fast sale. To achieve super-fast sales, you as a seller will have to take a hit on your price. Cash buyers typically offer around 70% to 80% of the current market rate; sometimes more. The amount that a fast sale company will offer to you for your property will depend upon the company. Some of the most reliable cash buying companies will use independent valuations to decide on a figure and show you the evidence that has enabled them to decide on that number.

Companies that buy houses will buy your house fast for cash, usually within 30 days, with most completing the sale within seven days. When you contact these house buying companies, they’ll ask for your details and those of the property, after which they’ll have a valuation. Then they’ll give you an offer. If you accept the offer, they will process the payment and you should receive funds in your account within a few days. This means you don’t have to worry about being in a chain or chasing up an estate agent.

Any Questions?

We hope this article has helped you to understand more about selling a property to fund full-time care and the benefits that are available. If you would like to speak with us about a fast cash sale, please send an email or call us.

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