As you get older, you may need later-life care, either in your own home or a residential or nursing home. One of the biggest questions this raises is whether you might need to sell your home to pay for that care.

When you’re fit and healthy, the thought of needing care is unlikely to be something you think about. But should you need it, there’s no getting away from the unwelcome truth: care is expensive.

Most people are required to fund part or even all of their later life care, depending on their income and assets. And if you want to make choices about the kind of care you’d want to receive in later life, it’s important to start planning well in advance so that you (or your loved ones) can afford it.

A specialist nursing home for dementia can cost up to £80,000 per year

How much does care cost?

Care can range from basic personal care in your own home, for an hour or two a day, to a full-time nursing home. A carer that visits your home to help you shower and dress will typically cost £25 – £30 per hour , but a full-time specialist care home for dementia or other demanding conditions can cost a lot more.

According to health care consultants Laing Buisson, care home fees cost up to £39,000, and a specialist nursing home for dementia can cost up to £80,000 per year depending on where you live and the care facility you choose.

Will I receive any help to cover the costs?

The amount your local authority pays towards your care is means tested. In other words, it’s calculated based on things like where you live, your income, your assets, your property and your savings (including pensions).

Generally speaking, you will only be eligible for funding if your capital and income is below £23,350 in England and Northern Ireland, or £28,000 in Scotland. In Wales, those figures are £24,000 (for home care) or £50,000 (for residential).

Regardless, that’s likely to include a large proportion of the population.

The government has proposed a ‘cap’ on care fees, meaning no one in England would need to pay more than £86,000 for their own personal care over their lifetime. The definition of personal care includes residential and nursing care, domiciliary support needs, such as washing and dressing, and managing health problems in your own home.

The cap was due to be introduced in October 2023, but is now expected come into effect in October 2025.

Do I need to sell my home to pay for care?

The value of your home will form part of the means-tested calculation (mentioned above) when assessing the amount you will be required to pay towards your care. But there are some exceptions.

For example, if you only need temporary care in a care home, then your home won’t be included in the assessment. The same is true if you’re receiving care in your own home, so you won’t need to sell your home to pay for it.

If you’re going into permanent residential care, and any of your qualifying dependents (for example a spouse, civil partner, or any children under the age of 18) already live in the property, your house can’t be included in the calculation either.

But if you need to go into a residential home and have no qualifying dependents living in your home, the value of the property will be included in your assessment.

This doesn’t always mean that you will have to sell your home, though. For example, you can ask your council to consider a deferred payment agreement. If they agree, the council will continue to pay for your care fees and reclaim the money when the property is finally sold or after your death.

This area is very complex and subject to individual circumstances, so it pays to seek professional advice before making any decisions.

If you do something that falls outside the rules, it could be considered a ‘Deliberate Deprivation of Assets'

Are there other ways to fund my care without selling my home?

There’s no magic wand that will discount your home from your care assessment, but there are alternatives to having to sell your property while you’re in care.

Receive care in your own home

Firstly, you might choose to stay in your home for as long as possible. The means test to assess funding cannot include the value of your home if you are still living in it. Therefore, you are far more likely to get help paying for care in your own home rather than moving into a care home. And even if you do need to self-fund home care, it’s likely to cost a lot less than in a residential setting.

Consider equity release

Some people choose equity release as a way of releasing money tied up in the value of their property without having to sell it. This approach can enable you to pay for your care fees and keep your property. However, although your home won’t have been sold, you are still taking money out of the value of your property, which means less inheritance for your beneficiaries.
For more on equity release, see The pros and cons of equity release

Renting out your home

Renting your home is another way to generate an income from your property that can be used to pay for your care home fees and maintain the value of your estate. But you need to be aware of additional fees, such as management costs and maintaining the property for your tenants, and plan for any potential tax implications.

Immediate needs annuity

You could buy an immediate needs annuity, which will pay for your care until you no longer require it. If you need to move into a residential care setting, the annuity will likely be quite expensive. If you pass shortly after taking out the policy, your beneficiaries will be unable to recoup the cost of the policy. However, if you live for many years, you could save a lot of money, not to mention removing the stress of finding the funds to pay for your long-term care needs.

For more on paying for care, see Planning for care home fees

What should I not do?

Some people try to reduce their care bills by deliberately reducing assets so they won’t be included in a funding calculation. But be careful – if you do something that falls outside the rules, it could be considered a ‘Deliberate Deprivation of Assets’. Ultimately, this could put you in a difficult financial position, with the added consequence that your children may be pursued for your care fees if you cannot pay them.

Situations that could be classed as ‘Deprivation of Assets’ include:

  • Gifting your home to your children (or anyone else)
  • Giving money away
  • Using savings to buy items that would be excluded from a funding assessment
  • Placing your property into trust
  • Spending excessively just before you need care

Amber River Financial Planning

If you’re considering how you’ll pay for later-life care, it’s important speak to a specialist. Planning how you will pay for care fees is tricky, and it’s easy to fall foul of the rules with unintended consequences for you and your family.

At Amber River, we have financial planners who are qualified to help you with financing your later-life care. Whether your needs are immediate, or you’re simply planning ahead, they can help you make an informed choice.

Get in touch

To speak to us about your investment goals, or to arrange an appointment, call 0800 915 0000, or alternatively use our contact form here.