Avoiding Paying For Care Homes | Retirement

People sometimes think about giving away some of their savings, income or property to reduce the amount they’ll need to pay towards their care. But a local authority can refuse to pay for your care or ask you to repay care costs if they believe you’ve done this. Here, we explain everything you need to know.

Protecting your money from the cost of care: the facts

Know the facts
What counts as deprivation
What counts as fair spending
What happens if you try to avoid paying for care

If you’re seeking help to pay for care, the council will look into your finances and check you haven’t tried to give money or property away. This is called ‘depriving yourself of assets’. Here, we bust some of the common myths.

1

I’m allowed to gift up to £3,000 a year

False: This rule only applies to Inheritance Tax. When it comes to a care funding assessment, gifts of any amount outside your usual pattern of spending can be considered depriving yourself of asset.

2

If I give away an asset at least 7 years before I need care funding, it’s not a deprivation

False: The 7-year gifting rule only applies for inheritance tax. There’s no limit to how far a local authority can look back to search for any financial gifts you’ve given. But the further back they look, the harder it will be for them to suggest you deliberately deprived yourself of assets.

3

I can put my money into an Asset Protection Trust to protect it from care costs

False: Some companies advertise these trusts as a guaranteed way for you to avoid paying for care, but this isn’t true. It may still be considered as deprivation.

4

I can sell my home, or other assets, for less than their true value to avoid deprivation rules

False: Selling an asset for considerably less than its true value can be considered a deprivation.

5

Having an up-to-date Will means my assets will be protected

False: Having an up-to-date Will is important but it will only come into effect after you have died. It can’t be used to protect your assets whilst you’re alive.
To make sure you’re eligible for financial help, your local council will check you haven’t intentionally reduced your assets by looking at two things:

Motive

When you gave away or moved your asset, was avoiding paying for care the reason, or a significant factor in your decision?

Timing

At the time, were you fit and healthy, with no way to see a future need for care?
How local authorities investigate

Local authorities will often ask you to share bank statements going back months, years or even decades to help them decide if you’re entitled to financial help. If you used to have an asset but you don’t own it anymore, you’ll need to prove this by giving some evidence to the local authority.

This could include:

A trust deed

Deed of gift

Receipts of expenditure

Proof you used the money to repay any debts

A lump sum payment to someone else, for example as a gift

A transfer of title deeds for a property

Assets that have been converted into another form, such as personal possessions – for example, artwork or cars.
Examples of deliberately avoiding care costs

Selling your home to your children for a nominal fee (e.g: £1)

If you sell your house, it needs to reflect its real value.

Purchasing something you don’t need, outside of your normal spending pattern

Such as expensive artwork or a new car. Possessions aren’t considered in the financial assessment but if you purchased them to ‘hide’ your money, it could be considered a deprivation.

Giving away your right to income from an occupational pension

The financial assessment will count income you’ve given away as well as any money you have.

Gifting large sums of money for certain events

Like Birthdays, Weddings or Religious Holidays. You can continue your usual pattern of spending, but if you start giving away larger amounts than you have before, it would likely be seen as a deprivation.
There are some things you can spend larger amounts on, but it’s a good idea to keep receipts as evidence.

Below are some examples of where spending a larger amount of money is unlikely to result in a local authority treating you as having deprived yourself of an asset.

Please note these are examples only. If you are unsure of whether an action is likely to be considered a deprivation, you should seek further advice.

01

Improving your home to help you manage

Sue and John live at home but recently, Sue has found it harder to get up and down stairs and to climb in and out of the bath. Sue arranges for carers to come and help her regularly and spends £12,500 from their joint savings to install a stair lift and a wet room. Sue wasn’t trying to avoid paying for care by spending this money, so it shouldn’t count against her application for help with care costs.

02

Moving to a new home better suited to your needs

Stephen’s needs more care than he used to, and his home isn’t suitable for him anymore. He decides to move to Surrey to be closer to his children, so they can see him and offer support more regularly. To afford his move from Yorkshire, Stephen adds £50,000 of his savings to the amount he got from selling his house – this allows him to buy a bungalow in Surrey. Stephen spent this money to be closer to his family, not to avoid paying for care.

03

Equipment to help you manage a disability

Christine recently suffered a stroke, leaving her paralysed on one side of her body. To continue to get out to see her family, she spends £8,000 on a second-hand car adapted for wheelchair users. She’s the registered owner, but her children are insured as drivers to be able to take her out for trips. Christine spent this money to keep her independence, not to avoid paying for care.

These are just examples and, of course, every case is different. As well as your motives and the timing, your local authority will consider whether your financial choices are in proportion.

An example

If Christine, from our third example, had bought a luxury car costing £80,000, then the local authority could suspect that a significant factor in this choice was an attempt to avoid this money being used to pay for care.

If you’re not sure whether your choices could be considered as deprivation, it’s a good idea to get legal or financial advice from a specialist before you go ahead.

How shared bank accounts and property are treated

If you have a joint account or co-own your house, there are steps you can take to make it clear who owns what. We always suggest taking legal advice before you do this, to check it’s right for you.

Example 1

If you and your partner have a joint account with £50,000 of savings, you can split it into two accounts of £25,000. This means the person who needs care would only need to spend £1,750 rather than £26,750 before you’re entitled to funding support. Your partner’s £25,000 won’t be included in any decision about your finances.

Example 2

If you jointly own your home, you can put the ownership of it into ‘Tenants in Common’ rather than ‘Joint Ownership’. If the person who doesn’t need care were to pass away, their share of the house could be passed on to another family member. Otherwise, their share will go to the person needing care, and could then be used to pay for care.
If they believe you’ve reduced your assets to avoid the cost of care, the local authority has a few options.

Notional Capital

This means treating you as though you still own money you’ve given away or spent. Each country in the UK allows you some savings that don’t count in your financial assessment. But under Notional Capital rules, you may have to spend this on care after all.

An example of Notional Capital

Mark lives in England, which means he’s allowed to keep £14,250 in savings. He has £29,300 in savings but a week before he move into a care home he gives his son £9,000. The local authority decide he’s deprived himself of money and apply Notional Capital rules. So, while in reality Mark now only has £20,300 in savings, the local authority treat him as though he still has £29,300.

Notional Income

Similar to Notional Capital, this is where you have either given away your right to claim an income or haven’t applied for income you’re eligible for. It means the local authority can treat you as though you’re receiving this money.

An example of Notional Income

Joan has a pension worth £40,000. She’s chosen to receive £40 a week as income, but the maximum she could get is £150 a week. The local authority can assess her income based on Joan receiving £150 a week.

Recovering charges from someone else

If you move an asset to someone else to avoid it being included in your financial assessment, the local authority can require them to pay for your care up to the value of that asset.

An example of recovering charges from someone else

Mohammed lives in Northern Ireland, so he can keep £14,250 in savings that won’t be counted in a financial assessment. He’s paying his own care costs and moving into a care home. He has £30,000 in savings but gives £10,000 to each of his three children. The local authority will still consider this as Mohammed’s money. They won’t count savings up to £14,250, but they’ll expect his children to pay back the other £15,750 for his care. That’s £5,250 each.

Debt recovery

If the local authority organises care for you but you refuse to contribute towards the cost, they can treat this like a debt and apply to the court to request that you pay them back. They can ask for repayment up to the value of the assets they believe you’ve deprived yourself of.

Getting the right advice

Deprivation of Assets is treated on a case by case basis by local authorities. The above are only examples of how a deprivation may be treated. If you would to discuss your own finances in greater detail, we would suggest seeking specialist financial or legal advice

Challenging the local authority’s decision

If a local authority believes you deliberately reduced your assets to avoid paying for care and you don’t agree, you can make a complaint to challenge the decision.

01

Contact your local authority and ask for a copy of their formal complaints procedure and contact details for the Local Government Monitoring Officer. Their role is to make sure the local authority is following all relevant guidance and legislation.

02

Make your formal complaint and send a copy to the monitoring officer.

03

If the local authority doesn’t change its decision, they’ll explain how to take your complaint to the Care Ombudsman.

Tips for when you complain

Keep your complaint focused on your motive and the timing of your decision to get rid of an asset.

Share any evidence you have, like bank statements and receipts that show your pattern of usual spending existed before you knew you’d need care.

Give details of any correspondence you’ve had with the local authority, including names and dates.

It isn’t necessary for you to have legal representation, but you can if you wish to.

Typically, you have 12 months to make a complaint, from the date you have the local authority’s decision that you deprived yourself of assets. The local authority should respond within six months, but often it’s quicker.

Read the government’s guidance

Next steps

Our Care Costs Calculator can help you understand the cost of care in your area, sources of support and different ways to pay. If you would like someone to talk in more detail about care funding, our Care Concierge team can help.

Need help?

Understand your options

Knowing your options before you need them can help you get the right care at the right time.

Finding the right care

Find local help to you

Whether you need some help at home, or want to find out more about Care Homes in your area, our Finding Care tool can help.

Finding care tool

Need legal advice?

Solicitors for the Elderly are an independent specialist group of lawyers who support and make a difference to older people. They may be able to help you with Power of Attorney and Deputyship.

Find a lawyer

Mythbusting: Ways to avoid paying for care costs

1

2

3

4

5

Motive

Timing

How local authorities investigate

Selling your home to your children for a nominal fee (e.g: £1)

Purchasing something you don’t need, outside of your normal spending pattern

Giving away your right to income from an occupational pension

Gifting large sums of money for certain events

Improving your home to help you manage

Moving to a new home better suited to your needs

Equipment to help you manage a disability

Example 1

Example 2

Notional Capital

An example of Notional Capital

Notional Income

An example of Notional Income

Recovering charges from someone else

An example of recovering charges from someone else

Debt recovery

Getting the right advice

Contact your local authority and ask for a copy of their formal complaints procedure and contact details for the Local Government Monitoring Officer. Their role is to make sure the local authority is following all relevant guidance and legislation.

Make your formal complaint and send a copy to the monitoring officer.

If the local authority doesn’t change its decision, they’ll explain how to take your complaint to the Care Ombudsman.

Next steps

Understand your options

Find local help to you

Need legal advice?