How to avoid selling your house to pay for care

If you or a loved one need long-term care in later life, how will this be paid for? Will you have to sell your house? Or can you still leave your home to family members? And what help is out there?

Angela Kerr Director, Editor

It’s never too early to think about how you will pay for long-term care in later life, either for you or a loved one. It’s a distressing thought in itself, even before you have added the worry of how it will be paid for. But careful planning will help you understand possible future costs and how they can be met. Careful planning and advice also allows you to explore options that could mean you avoid selling your house to pay for care.

Perhaps it’s you or your partner who may soon need care – alternatively, you may be reading this on behalf of a parent or elderly relative. Either way, we’ll say ‘you’ in this article to refer to the person who would be receiving the care. Here are the main points to be aware of.

Can the government take your house to pay for care?

In the UK, the government can potentially require you to use your home’s value to fund care costs. However, this typically happens when you move into a care home permanently and you don’t have a spouse or dependent still living in the home.

Can you avoid selling your house to pay for care?

As we explain above, if you or your spouse / partner (or certain other people) want to continue living in your home, then you’ll avoid having to sell up to pay for care.

You and/or any qualifying dependants who live in your home have the right to stay there indefinitely, and can’t be forced to sell up to pay for your care. A qualifying dependant could be any of the following who also lives in your home:

• your spouse
• your civil partner
• your unmarried partner
• a close relative over 60 (or incapacitated)
• a close relative under 16 for whom you are legally responsible
• your ex-spouse / partner if they are a single parent

In short, you don’t have to worry about your nearest and dearest becoming homeless just because you need care.

When might you need to sell your house to pay for care?

You may have to sell your home to pay care fees if – and only if – you move into a residential care home and there are no qualifying dependants still living in your own home. Even then, you might not have to sell (or not immediately), if you can fund your care from other resources, such as savings or private pensions. However, care home fees are expensive – around £30k to £40k a year – so most people in this position may need to resort to their biggest asset, i.e. their home.

But what if you continue to live in your home – or you move into a care home but your spouse or dependant remains in the family home? What happens then, and who pays the fees? This is where things get slightly more detailed, but it’s very useful to know how it works.

Getting help with paying for care – how it’s worked out

If your financial assets (i.e. income, savings etc.) are below a certain threshold, you will qualify for help with your care costs. This is assessed via a ‘means test’.

If you (or a qualifying dependant) will no longer be living in your home, the value of your home will be included in the means test. But if your home will still be occupied by one of the above, then only your other assets count.

Please note: the government have planned social care reforms for England from 2023. These include changes to the thresholds. Read our guide on social care reforms to see what’s coming. In the meantime, the following still applies.

Thresholds for receiving financial help with care costs

People with assets below the lower threshold will be entitled to the maximum care fees support available from their local authority (N.B. this isn’t an unlimited amount, but should be enough to provide adequate standards of care). Those with assets above the top threshold won’t receive any support, and those with assets between these two figures will receive financial support on a sliding scale.

Naturally, if the value of your home is taken into consideration, you will almost certainly exceed the upper limit and get no help from the local authority.

In the meantime, here are some examples to show how it works:

Gwen, recently widowed, moves into residential care. Her savings are under £14,250 but her home is worth £150,000. Since no-one is living in her home anymore, its value is included in her means test and so she doesn’t qualify for any financial help. She must therefore sell the property in order to pay her care home fees.

Mike and Louise are married. Mike’s mobility issues mean he needs residential care, but Louise decides to stay in the family home (so it isn’t included in the means test). Their joint savings are £50,000 so they won’t qualify for financial help yet – but once their savings drop below the threshold for England (£23,250) Mike will qualify for more help with his care home fees.

Robert lives alone since the death of his civil partner, but feels able to stay in his own home with a carer visiting daily. Again, the value of his home doesn’t count for the means test, because he is still living there. His savings are £20,000 so he will qualify for some financial help, and receive the maximum level of help when his savings drop below £14,250.

Need help planning your long term finances? Find a local independent Financial Adviser through our partners at Unbiased.

So is it better to get care in your own home?

The short answer is that you are far more likely to qualify for financial help – and sooner – if you receive care in your own home rather than move into a residential care home. Firstly, your home is not included in the means test, so only your savings and other assets count. Secondly, when you receive care at home, you only pay for as much as you need (and are not paying for accommodation), so the costs can be kept much lower for longer.

Thirdly, if you start off by receiving care in your own home, you reduce the risk of accidents and other issues that might compel you to go into residential care sooner than you would wish. If you eventually reach the point of needing 24-hour care in your own home, the costs could equal and even exceed those of a care home – but if you are a couple and you both need care, the costs may be more comparable.

Can I gift my assets to avoid care fees? 

Many people ponder this question: ‘What if I give everything to my children first? Then the means test will show I don’t own anything!’ Believe it or not, the government has already thought of this. If, for example, you transfer the deeds of your home to one of your children shortly before you need to go into care, the local authority will treat this as a case of ‘deliberate deprivation of assets’ and will assume that you still own the home. The same applies if you were to make a sudden large gift of money to your children, to reduce your savings. The local authority is still likely to include this money in your means test unless the gift was made several years previously, or gradually over a long period of time.

A much wiser strategy is simply to try and continue living at home for as long as you can, perhaps with the help of visiting carers.

Can my spouse or my children be forced to pay for my care?

If your assets are jointly shared with your spouse (e.g. shared bank accounts, other property under a joint mortgage) then this shared wealth will count as part of your means test. However, assets owned solely by your spouse (e.g. bank accounts or investments solely in their name) do not count as part of the means test. But again, don’t be tempted to transfer all your assets solely into your spouse’s name at the last minute, as this will count as deliberate deprivation.

The better news is that your children’s assets are counted as completely separate from yours, so are never included in your means test.

What’s the best way to pay for my care?

Whether you choose to receive care in your own home or in a residential home, and whether or not you have financial support from the local authority, having enough money is only part of the issue. The big challenge is to work out how to use that money as effectively as possible, so that you can obtain the exact level of care that you need and receive good value.

This is why it’s very helpful to see an independent financial adviser (IFA) who specialises in long-term care funding. Your IFA can talk to you about your needs, give you guidance on how to apply for financial support, and advise you on the best way to use your own assets. If you do sell your home to fund your care fees, this will involve a huge sum of money that needs to be invested somewhere or otherwise used to produce an income, so it’s vital to get this right. You can find this kind of specialist adviser using our tool below.

For help with financial planning, our partners at Unbiased can connect you with the right adviser. Find a local adviser and book your free initial consultation today.