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 the family home or can you leave it to loved ones? We look at what help is available and look at options of how to avoid selling your house to pay for care.

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 dependant still living in your home.

How to avoid selling your house to pay for care

You can avoid having to sell your house to pay for care if you or your spouse / partner (or qualifying dependants) want to continue living in your home. 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.

What is the financial assessment for?

A financial assessment, or means test, of your assets will work out how much, if anything, the council will pay towards the cost of your care.

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.

How much can you keep before paying for care in the UK?

There are the thresholds for receiving financial help with care costs in the UK:

Those with assets above the top threshold generally won’t receive any support. If your assets are below the lower threshold, you’ll be entitled to the maximum care fees support available from your local authority. If you’re within the upper and lower limits, the help you’ll receive will depend on your circumstances.

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

Selling a house to pay for care examples

Here are some examples of when someone would or would not need to sell their house to pay for care in England.

• 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.

You don’t have to make life’s big financial decisions alone. Get the right IFA for you today with our partners at Unbiased.

New rules for care home payments

New rules for care home payments were announced in 2021, including the introduction of a care homes fees cap of £86,000 on the amount anyone in England will need to spend on their personal care over their lifetime. In addition, the upper threshold at which someone becomes eligible for financial support from their council would rise from £23,250 to £100,000 in England.

The previous government said these changes would take effect from October 2025 but we are waiting to hear whether this will happen under a new Labour government.

Can I give my home or other 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!’ However, it is not as simple as that – there are complex rules to be aware of.

Deprivation of assets

Deprivation of assets is when someone reduces their assets (such as property or savings) on purpose so that they won’t be included in a financial assessment for care home fees. One example of this might be if you transfer the deeds of your home to one of your children shortly before you need to go into care.

If the local authority decides you have deliberately reduced your assets to avoid paying care home fees, they will usually calculate the value of your estate prior to its deprivation of assets. And you could be prosecuted by your local authority too.

With inheritance tax, there’s a 7 year rule that no inheritance tax is due on gifts you give if you live for 7 years after giving them – unless the gift is part of a trust. But there is no 7 year rule when it comes to deprivation of assets. So before transferring your property or savings to a loved one, be sure to take independent financial advice.

You don’t have to make life’s big financial decisions alone. Get the right IFA for you today with our partners at Unbiased.

Are next of kin responsible for care home fees?

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 may 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.

The benefits of paying for care at home

If you can avoid needing residential care, there are a number of benefits of paying for care at home instead.

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 for a number of reasons:

• Your home won’t be included in the means test.
• 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.
• If you start off by receiving care in your own home, you may 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.

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.

There are a number of different ways you may choose to pay for your care, including:

• Using savings: You may be able to avoid selling your house to pay for care if you can fund it from other resources, such as savings or private pensions. However, care home fees are expensive – they may be around £60k to £70k a year.
• Deferred payment agreements: If your home is included in the financial assessment and you meet certain eligibility criteria, you may consider taking out a ‘deferred payment agreement’. This means the council agrees to provide financial help with your care home fees on the agreement you pay the council back from your property at a later date – either when the property is sold or from your estate when you die. This means you can postpone needing to sell your house to pay for care fees. But the council can charge an admin fee to set up a deferred payment agreement and you can be charged interest on deferred fees.
• Renting out your home: You may opt to rent out your home if you have a deferred payment agreement in place. You can use rental income towards your care fees. However, rental income counts as taxable income so it can affect any benefits payments.

To help you navigate the best way forward, it’s advisable to speak to 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. 

Selling my parents’ house to pay for care: Where to start

You won’t have to sell your parents’ house to pay for care home fees if they only go into a care home for under 12 weeks, or if they have personal savings enough to cover their care home costs.

Having considered the above information, and having discussed with an independent financial adviser, if you’re having to sell your parents’ house to pay for care, there are further potential complications.

First of all, you’ll need lasting power of attorney. This will allow you to act on behalf of your parents, sign the property forms, contract of sale and transfer document. You’ll need to provide a certified copy of the Power of Attorney to your conveyancing solicitor to proceed. If you don’t already have a power of attorney be aware it is a very complicated process and can take 20 weeks for it to be approved. You can apply at GOV.UK

Once you have obtained power of attorney, the council will value the property in their financial assessment. The present market value is less any mortgage or loan (including equity loan) secured on the property and less 10%. The 10% is set aside for the costs of selling the property. A professional valuer, such as a RICS-qualified surveyor, should undertake the valuation. 

Next you’ll want to remind yourself of how to sell a house with our step by step guide. You’ll need to find the 11 documents needed for the sale and find an agent to market the property. You can find the best performing local estate agents using our free Best Estate Agent Finder tool. Do then check their contract before signing (you don’t want any unnecessary extra costs to add to your stress!). And compare quotes from quality assured conveyancing solicitors to help you choose the best solicitor at the best price to handle the legal side of selling the house. They should have experience of dealing with cases like this, but remember to ask them, along with these 10 questions to ask before instructing a solicitor. Good luck!

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