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The average care home costs of a nursing home in England and Wales is in excess of £800 a week, or £41,600 a year. However the costs can far exceed even these figures and from client feedback we are aware that weekly fees in excess of £1,000 are not uncommon. Add to that complexity the limited training the state provides caseworkers and you have a recipe for financial disaster.
Setting up an asset protection trust is the best way to protect your estate from being used for care home fees and to preserve your loved ones' inheritance. Many people will be tempted to simply gift their money/property to their children, to avoid care fees. However, you need to be very careful as this gift could be classed as a Deliberate Deprivation of Assets. This is when a local authority decides that you have deliberately reduced your capital to avoid care home fees.
How risky is it to transfer my assets or life savings?
Something else older people needing to cover care costs may be considering is putting their home into a Trust. If you put house into Trust, you can assign ownership of your property to somebody else such as your children. It allows you to keep ownership of your home and delay paying the bills for your room in a care home until after your death. Even if a means test finds that you do not qualify for financial support from your local council, you may still be eligible for adeferred payment scheme. There is no limit to how far back the local authority can look to work our whether any care home fee avoidance has taken place. There is also a common myth Medicaid expects you to sell the home to qualify for financial support.
A trust strategy also takes advantage of that tax efficiency, but it goes a step further by protecting the money from long-term care costs and other retirement risks. You can ask your council for a financial assessment to check if you qualify for any help with costs. You can choose to pay for care yourself if you don't want a financial assessment. The cost of care is rising at a record rate, with the average room in a care home now costing over £33,000 a year. It is no surprise then that people may consider drastic steps to avoid paying for care. In fact, the reality is that the value of the family home is taken into consideration when calculating whether an individual has assets exceeding the means testing threshold of £23,250.
Can I give my assets away?
To avoid disqualification from Medicaid, a person would need to sell or transfer their assets at least 5 years before applying. Doing so extends beyond the look back period, so they can still apply for Medicaid and have it pay for nursing home care later in life. Upon the recipient’s death, they will have no assets for the state to collect from. If an individual pays for some or all nursing home expenses through Medicaid, states can seek repayment upon their death through the Medicaid Estate Recovery Program .
Revocable living trusts are among the most well-used trusts for estate planners, and with good reason. With a revocable living trust, you can continue managing and controlling your assets until your death. You can also decide to revoke the trust at any point until your death. Some people believe that placing their assets into a living trust will help them qualify for Medicaid benefits because their assets will no longer be in their name. But with good planning — and making the most of the lower tax rates put in place by the Tax Cuts and Jobs Act — that transition can be done thoughtfully and at a lower cost over the next few years. Many advisers urge their clients to make the most of the TCJA’s lower tax rates — which are in place until the end of 2025 — by converting the money in their traditional IRAs into Roth accounts.
How local authorities investigate
The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. Always obtain independent, professional advice for your own particular situation. Unfortunately, there isn’t an obvious way, aside from financial planning ahead of old age to give yourself enough funds to meet the cost. They may also suggest having personal help from a care worker (to help you dress/wash/take medication), meals on wheels, or they will suggest either residential accommodation or a nursing home.
Sarah Cornish of Coodes Solicitors warns of the pitfalls of transferring money to a family member in an attempt to avoid care home fees. Ensure you have full access to your parent’s medical records before and during a stay in a nursing home. This will help you to monitor changes in the healthcare needs of your parents which may affect care funding criteria. "This means that to qualify for long term care funding, you need to be in receipt of a low income and own little to no assets.
You can give your children large financial gifts, as long as it is clear that you are not doing so to avoid care fees. There are no particular limits to this, but would depend on your age, health and the prospect of you needing care in the near future at the time of the gift. It is better to plan in advance to prevent your property being sold to pay for your care home fees in the future, which could leave your children or family with little to no inheritance. After your care needs assessment, the local authority will carry out a financial means test which will determine how much you must contribute to your care fees.
In some cases, local authorities may be prepared to pay for your fees, but not fund the full cost of your preferred destination. However, there are still things that you can do that could potentially exclude your home from any care fees assessment. This can work out well if the Medicaid recipient has a spouse or beneficiary who wants to remain living in the home, or the recipient doesn’t plan to move into a nursing home for several years. Additionally, this option allows the trustee to sell the home without a Medicaid penalty.
But there are things you can do which can potentially exclude your home from any care fees assessment, which we explain in our guide below. As more and more people are requiring care in their old age, it is important to plan ways to finance any potential future care fees as soon as possible. The financial assessment will count income you’ve given away as well as any money you have. If you are thinking about receiving care and support at home, then you may be worried about how much your home care is going to cost. While it is true that the cost of home care is generally far less than the cost of residential care, home care can still amount to a considerable sum.
This will mean that rather than being left with a minimum of £14,250 after paying for care, the local authority only leave mark with £5,250. 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. If an individual is approaching the end of their life then a “fast track” Continuing healthcare funding assessment may be appropriate. This enables the individual to receive prompt NHS funding to meet the cost of care at the end of life stage.
The local authority will ask about any previously owned assets, and take into account any reasons you’ve had to hand over assets or property to other people. They’ll consider timing, alongside any motive or intention and the fee. You may hope for help with care home fees from your local authority, but this is means-tested and thresholds are very low.
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. If your local council has given you acare needs assessmentand found that you are in need of a care home place, then local authorities will also arrange for you to have a financial assessment or means test. This is so that the local authority can calculate how much financial support you are eligible for.
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