Why many people have been forced to sell their home to fund care costs - Jenny Ross

My wife and I own our house outright (worth £400,000 approx.) and we also own outright a cheaper property (worth £160,000 approx.) where our daughter, her husband and young child live. If at any time in the future one or both of us should need social care, are there any circumstances in which we would be forced to sell the house where our daughter lives?

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Jenny says…

The cost of care can derail even the best laid financial plans. On average, a care home in England costs around £35,000 a year, according to consultancy LaingBuisson. If you need nursing care, you could pay much more. This means that many people have been left with little choice but to sell their home to fund their care.

State support is available, but only to those with assets below a certain limit. In England, the ‘capital limit’ for both residential care funding and care at home is £23,250. These limits vary across the UK.

Whether the value of your home counts towards the threshold depends on what type of care you need to pay for. If you’re receiving care in your home, it won’t be included. If you’re going into residential care, the value of your home will be included unless someone else is living there, and that person is your partner, a relative over 60, a relative who is disabled, or a child of yours under 18.

So if you needed to go into a care home and your wife was still living in the home you own together, you would qualify for local authority funding if your other assets and savings were worth less than £23,250 (as you live in England). But as you own a second property worth £160,000, you won’t be eligible and will have to cover care fees yourself.

In theory that could entail the awful decision of having to sell either your own home or the home your daughter lives in if you were unable to cover your care costs through other means.

Gifting the property to your daughter might seem like an obvious solution, if you’d otherwise qualify for local authority funding. But that’s not necessarily the case: if care needs were foreseeable the council could treat this as ‘deliberate deprivation of assets’ and still include the property in its means test.

As things stand, there is no limit on the amount you could end up paying for your care. An estimated one in seven people aged 65 face lifetime costs of more than £100,000. But from October 2023, the Government will introduce an £86,000 cap on the amount anyone living in England will need to spend on personal care over their lifetime.

The threshold for local authority support will also change, meaning more people will become eligible: if you have less than £20,000 you won’t have to contribute anything; if you have between £20,000 and £100,000 you’ll receive some support.

While the 2019 Conservative Party manifesto stated that “nobody needing care should be forced to sell their home to pay for it”, even under the new system some people – especially those who don’t have much in other savings – will still have to sell their home to fund their care.

If you find yourself in this situation, one option is a deferred payment agreement. This allows you to use the value of your home to cover care home fees without having to sell it straight away. Your local council will help to pay the bills on your behalf, and you repay them when you choose to sell your home, or after your death. Bear in mind that your council may charge interest on deferred payments (capped by the Government at 0.95 per cent in England), as well as admin fees.

If you’re able to receive care at home but are struggling to meet the costs, equity release is an alternative to selling your home. With a lifetime mortgage – the most common type of equity release deal – you borrow a sum that doesn’t need to be paid off until you sell your home, move into care or die.