Care home fees are likely to be a worry for many pensioners who’ve reached a period in their life when they’re no longer able to look after themselves and need to turn to residential care.
The reason for those worries isn’t hard to fathom – the rising cost of care home fees. With fees varying based on the type of care, location, provider and your savings, the cost of care can be a daunting prospect.
Here, we explore average nationwide care home fees in 2024 and discuss whether placing your property in trust can help or hinder financial assessments of your means.
Average UK care home fees in 2024
Care homes provide personal care, accommodation and professional help for adults requiring additional support with their daily lives.
Residential care homes offer a basic standard of care while nursing care homes provide more specialised, round-the-clock nursing care.
Care home costs in the UK can vary depending on several factors, including:
- The type of care needed
- Where you live in the UK
- Your savings and property
- The care home provider
According to figures from care home comparison site, Lottie, the average weekly residential care home fee, in 2024, is £972. That equates to £4,212 per month or roughly £51,000 for a full year of care.
Nursing care home fees are slightly higher, averaging £1,196 a week. That takes monthly costs to £5,183, resulting in an annual bill in the region of £62,000.
How care home fees are funded
Your local authority will undertake a care needs assessment to determine the level of support you need followed by a means test to determine the extent of your assets and how much you and/or they should pay towards your care.
The amount of state help you may be entitled to depends on where in the country you live.
England
In England, the maximum value of any savings and assets (including your home and pensions) you can own is just £23,250 before you must pay for all your care home costs yourself.
This process is known as “self-funding”.
If your assets are between the lower threshold of £14,250 and the upper threshold of £23,250, your local authority should provide some financial support.
However, you’ll likely need to pay a contribution based on your income as well as a “tariff income” (an extra £1 per week in income for every £250 – or part of – in capital).
The same applies for assets below £14,250, minus the payment of a tariff income.
Wales
In Wales, there is a single capital threshold of £50,000. If you have assets above this benchmark, you’ll be required to self-fund the entirety of your care costs.
Below that threshold, you should qualify for local authority funding, which may be supplemented by contributions from your income.
Scotland
In Scotland, the Scottish government provides free personal and nursing care for anyone aged 65 or over – regardless of assets and income. However, contributions towards accommodation costs are required.
Means testing takes place to determine your ability to contribute towards unfunded costs. The lower threshold is £21,500 and the upper threshold is £35,000, below which state support is available.
New rules for care home payments
In 2021, the Conservative Government announced an overhaul of adult social care charging in England.
As part of recommendations in a paper entitled ‘Building Back Better: Our Plan for Health and Social Care’, ministers proposed a care home fees cap of £86,000, which would be the most anyone would pay for personal care in their lifetime.
Ministers also pledged to increase the lower capital threshold to £20,000 and the upper threshold to £100,000.
These new provisions were due to come into force in October 2023 but were pushed back to October 2025 by the Government, leaving some commentators questioning whether the reforms will ever come to fruition.
Is it necessary to sell your home?
Until there is clarity about the care home fees cap and the associated reforms, many people will naturally worry that their home is at risk. The burden of costly care home fees can sometimes necessitate a sale.
The average UK house price reached £283,000 in the 12 months to March 2024, according to the latest figures from the Office for National Statistics (ONS).
Meanwhile, an often-cited paper commissioned by BUPA found that the average length of care home stay in the UK was 2.5 years (801 days).
Based on the residential care home and nursing care home costs we quoted earlier, that duration of stay has the potential to absorb between 45% and 55% of the value of the average home.
However, there are some instances where your home will not be included in the financial assessment if any of the following people reside at your property:
- Your partner, spouse or civil partner.
- An estranged or divorced partner who is a lone parent.
- A relative who is aged 60 or over.
- A relative under 60 who has a disability.
- A child of yours aged under 18.
Your home will also be excluded from means testing if you enter a care home for temporary or short-term care.
Can you avoid care home costs?
Since self-funding is necessary if your savings and property are currently worth more than £23,250, many people might be tempted into giving away or transferring property to their children for a nominal sum.
However, these actions are taken into account when the local authority makes its financial assessment of your means and they may decide that your gift or transfer amounts to a “deprivation of assets”.
If there has been a deprivation of assets, their value is still included in the assessment of your means and, in some cases, the beneficiaries of your actions may be required to contribute to the cost of your residential care.
Putting your house in trust to avoid care home fees
Questions involving deprivation of assets and so-called “deliberate deprivation” are resolved with reference to the intention behind any gift or sale for a nominal amount.
If the transfer is made with the deliberate intention of avoiding care home fees, for example, the local authority is likely to consider the move a deliberate deprivation of assets and include the value in the financial assessment of your means.
The situation – and your motivation – is likely to be less obvious, however, if you place the property in trust as part of the general management of your financial affairs as you enter your mature years.
With your property in trust, you typically continue to live in your home and pay the trustees a nominal rent until your transfer to residential care, when that time comes.
Placing the property in trust may also be a way of helping your surviving beneficiaries avoid inheritance tax liabilities.
Home insurance for a property held in trust
If you decide to place your home in trust, it is important to attend to the necessary property insurance implications. That means investing in specialised Property Trust Insurance to ensure you are adequately covered.
It is vitally important that the Trustees – and any solicitors acting on their behalf – arrange and manage the insurance of your home in the proper manner.
The change in ownership to a new legal entity means that it is the Trust – and no longer you – who has an insurable interest in the home.
Unless the necessary protection – in the form of building insurance, public liability insurance and potentially contents insurance – is properly arranged in the name of the Trustees, the cost of any loss, damage or claims against the property owner will need to be met from the funds held by the Trust.
Organising home insurance for a property held in trust can be a complex process. For that reason, we recommend speaking with one of our experienced advisers here at UKinsuranceNET – you can give us a call on 01325 346 328.
Consider consulting a financial adviser
Putting your house in trust to avoid care home fees is a complicated matter. Given the complexity and potential inheritance tax (IHT) implications of such a decision, you might want to consult an independent financial adviser to discuss your options.
If you transfer your home into a trust, IHT is payable by the trustees at 20% on the value above the threshold of £325,000. If you were to die within 7 years, your executors will have to pay a further 20% IHT on the transfer.
If you continue to live in the home after the transfer, then you will have made a gift with reservation and so it will always be treated as still owned by you for IHT. The 10-year anniversary IHT charge may also apply to your trustees. Detailed tax advice should always be obtained!
For more information about Property Trust Insurance or to discuss your requirements with an adviser, please don’t hesitate to contact us on 01325 346328.
NB: This blog was first published on 18 November 2020 and has since been updated to provide the most accurate and up-to-date information available.
Disclaimer: The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication.
