Will Care Home Fees Wipe Out Your Children's Inheritance?

Yes, care home fees can significantly reduce or completely wipe out your children's inheritance if you need to pay for care. However, there are legitimate ways to protect your assets and safeguard your home whilst ensuring you get the care you need.

The question worrying many families is whether years of careful saving and property ownership will vanish into care costs. The honest answer is that care home fees often do consume much of what families hoped to leave behind. But understanding what protections exist and how to plan properly can help minimise inheritance loss to nursing home fees.

How Much Do Care Homes Actually Cost?

Care home fees in the UK are substantial. Residential care typically costs between £700 and £1,200 per week. Nursing home care often costs more. That's roughly £36,000 to £62,000 per year, and these costs keep rising.

At these rates, even a relatively short stay in a care home can eat through savings quickly. Someone living in a care home for five years could easily spend £180,000 to £310,000. For many families, this represents most or all of their potential inheritance.

When Your Home Gets Counted: The Financial Assessment for Care

When you need care and support, local authorities carry out a financial assessment to work out who pays. This assessment looks at everything you own, including your home.

The Thresholds (2024/25 in England)

If your assets total more than £23,250, you pay full care home fees yourself. If you have between £14,250 and £23,250, you pay some costs. Below £14,250, the local authority funds your care.

What Gets Included in the Assessment

The financial assessment counts savings, investments, property, and valuable possessions. Your family home is usually your biggest asset, and in most cases, it gets included when you assess your assets for care.

When Your Home Is Protected from Care Fees

Your family home won't be included in the means test if certain people still live there:

Your spouse or partner continues living in the property. Their home is protected for as long as they remain there.

A relative aged 60 or over lives in your home. This protection helps adult children or siblings who've been living with you.

A disabled relative lives there. The property is protected regardless of the relative's age.

A dependent child under 18 lives in the home. This ensures children aren't made homeless by care costs.

These protections are automatic. Local authorities can't force the sale of your home whilst these qualifying people live there. This is one of the most effective ways to protect your home from care fees when someone still depends on it.

Legitimate Ways to Protect Your Assets and Inheritance

You can take steps to protect some inheritance from care home fees, but you need to understand what's allowed and what could backfire.

What You Cannot Do: Deliberate Deprivation of Assets

Simply giving away your home or savings to avoid care fees is deliberate deprivation of assets. Local authorities look for this and will treat you as if you still own those assets. You'll be assessed to pay for care from money you no longer have, and local authorities may pursue whoever received your gifted assets.

Even transfers made years ago can be challenged if local authorities believe avoiding care costs was part of your thinking. There's no time limit on how far back they can look.

Read more about deprivation of assets rules to understand what local authorities consider deliberate.

Tenants in Common: Protecting Your Share of the Property

One legitimate strategy to protect some of the family home involves changing how you and your spouse own your property. Most couples own their home as "joint tenants," meaning when one dies, the survivor automatically inherits everything.

Switching to "tenants in common" lets you each own a specific share of the property, typically 50% each. When one person dies, their share of the property can pass to children or go into a trust rather than automatically going to the surviving spouse.

How This Helps Protect Inheritance

If one person requires care and would need to go into care, only their share of the home (usually 50%) is counted in the assessment, not the whole property. The other person's share remains protected.

When the first person dies, their share of the home has already passed to the children or into trust. If the surviving spouse later needs care, only their 50% share gets assessed, meaning half the property's value has been protected for inheritance.

Important Considerations

You must set this up well before anyone would need care. Doing it when care needs are already apparent could be seen as deliberate deprivation.

You need proper legal advice to set up the tenancy correctly and ensure any trust arrangements are valid.

The surviving spouse must have enough other resources to fund their care if needed, as they can't access the deceased partner's share.

Life Interest Trusts and Property Protection

A life interest trust can work alongside tenants in common ownership to protect your share of the home. When you die, your share of the property goes into trust. Your spouse has the right to live there for life (the "life interest") but doesn't own that share outright.

Benefits for Protecting Inheritance

Your share of the property is preserved for your children. When your spouse later requires care, only their own share of the home gets assessed by local authorities. Half the property value has been protected from care home costs.

This is a legitimate way to protect your home and savings when done properly and early enough, but you need specialist legal advice to set it up correctly.

Deferred Payment Agreements: Protecting the Home During Your Lifetime

If you need to go into care and your home would be counted in the assessment, you might not want to sell it immediately. A deferred payment agreement lets you delay selling.

The local authority pays your care home fees upfront. The debt is secured against your property and repaid when the home is eventually sold, usually after death. Interest accrues on the amount owed.

How This Affects Inheritance

Your children will inherit the home, but they'll need to sell it (or repay the debt another way) to settle what's owed to the council. The inheritance they receive is reduced by the care costs plus interest.

However, this arrangement means the property isn't sold during your lifetime, giving it a chance to increase in value. Any appreciation in the property value above the debt remains as inheritance.

Care Fee Annuities: Capping Your Total Care Costs

An immediate needs care fee annuity involves paying a lump sum to an insurance company. In return, they guarantee to pay your care home fees for the rest of your life, no matter how long you live.

Protecting Remaining Assets

By using some assets to buy the annuity, you cap the total amount spent on care. Your remaining assets are protected and available to pass on as inheritance. This can be an effective way to protect a portion of your estate whilst ensuring care fees are covered.

The annuity payments are usually paid directly to the care home and aren't counted as your income for tax purposes.

Early Financial Planning and Investment Structures

Planning well before you need care gives you more options. Working with financial advisers who specialise in later life planning can help structure your assets to protect some inheritance whilst ensuring you can fund your care needs.

Investment and Pension Planning

Careful investment planning might generate income to help pay for care fees whilst preserving capital where possible. Pension arrangements can sometimes provide income for care without depleting savings as quickly.

However, any planning must have legitimate reasons beyond simply trying to avoid care costs. The timing matters too. Arranging your finances when you're healthy and care isn't on the horizon is very different from restructuring everything after a health diagnosis.

NHS Continuing Healthcare: Free Care That Protects All Your Assets

Some people qualify for NHS Continuing Healthcare, which provides full funding for care needs based on health conditions rather than finances. If you qualify, your care is completely free, and all your assets remain protected for inheritance.

Eligibility depends on having a "primary health need" rather than primarily needing social care. Conditions like advanced dementia, Parkinson's disease, or other serious health issues might qualify you.

Many people who should receive NHS Continuing Healthcare don't get it because they or their families don't know to ask for an assessment. If you think you might qualify, request an assessment. It's worth pursuing because it protects your entire estate from care home costs.

Learn more about NHS Continuing Healthcare for care home residents.

Understanding Inheritance Tax Alongside Care Fees

Inheritance tax is separate from care fees but affects what your children ultimately receive. Currently, inheritance tax applies to estates over £325,000 (or £500,000 if you're passing your home to children or grandchildren).

How Care Fees and Inheritance Tax Interact

If care home fees reduce your estate's value, you might fall below the inheritance tax threshold. This means no inheritance tax is due, but of course, there's also less inheritance to pass on.

Some asset protection strategies that help shield your home from care costs might increase inheritance tax exposure. You need to consider both issues together when planning.

Professional advice from both care funding specialists and tax advisers helps you understand the impact of care fees on inheritance tax charges and plan accordingly.

What About Giving Money Away Early?

Many people think giving their home to their children years before needing care will protect it. This is risky and often doesn't work as planned.

The Risks of Early Gifting

If you give away your home and later need care, local authorities will investigate whether avoiding care costs was part of your reason for the gift. If they decide it was deliberate deprivation of assets, they'll assess you as if you still own the property.

The person who received your home (usually your children) could be pursued by local authorities to recover assets and pay your care fees.

You lose control of your home. If relationships break down, or if your children have financial problems or divorce, your home could be at risk.

You might create inheritance tax problems. Gifts only become fully exempt from inheritance tax if you live seven years after making them. That's the inheritance tax rule, though it doesn't protect the gift from being counted for care fee purposes.

When Early Gifts Might Work

Genuine gifts made when you're healthy, with no thought of future care needs, are less likely to be challenged. Regular patterns of helping family with education costs, house deposits, or other support that you've done for years typically won't be seen as avoiding care.

The key is intention and timing. If you deliberately reduced your assets to avoid care later in life, expect questions.

Protecting Your Family's Future: The Right Approach

Rather than looking for ways to hide assets or game the system, a better strategy to protect some inheritance involves honest planning with professional help.

Get Legal Advice Early

Speak with solicitors who specialise in estate planning and care fee planning. They can help you set up legitimate arrangements like tenants in common ownership and life interest trusts well before care is needed.

Work with Financial Advisers

Financial advisers who understand care funding can help you structure assets appropriately, explore care fee annuities, and plan how to fund care whilst protecting what's possible for your children's inheritance.

Understand Your Care Options

Different types of care have different costs. Understanding whether you need residential care, nursing home care, or might qualify for NHS Continuing Healthcare affects how much you'll spend and how much inheritance remains.

Learn about residential care and nursing care options to understand what level of care available matches your needs.

The Reality of Care Costs and Inheritance

The uncomfortable truth is that care home fees do often consume much of what families hoped to leave as inheritance. Years of saving and a valuable family home can disappear into care costs over a few years in a nursing home.

However, some inheritance can usually be protected through legitimate planning. The key is starting early, getting proper advice, and using legal methods rather than trying to hide assets.

For many families, ensuring Mum or Dad gets quality care becomes more important than preserving every penny of inheritance. It's about finding the right balance between protecting your family's future and ensuring proper care when you need it.

Planning Care Funding at Ashberry Care Homes

At Ashberry Care Homes, we help families work through these difficult questions about paying care home fees and protecting assets for your loved ones. We understand you want quality care without necessarily losing everything your family has built.

Our team can help you:

Understand how care costs will affect your situation Explore all funding options available to you Connect with specialist advisers for legal advice and financial planning Create sustainable plans that balance care quality with protecting what's possible

We work with residents and families to find solutions that work for individual circumstances. Every family's situation is different, and there's rarely a one-size-fits-all answer.

Contact us to discuss your care needs and how different funding approaches might work for you. We're here to help you make informed decisions about care and inheritance planning.

Read more about paying for care home fees and understanding care home fees and your finances.

The Bottom Line on Protecting Inheritance from Care Home Fees

Care home fees will likely reduce your children's inheritance, sometimes substantially. But complete wipeout isn't inevitable if you plan properly and early.

Legitimate strategies exist to protect your home from care fees and safeguard your assets. These include tenants in common ownership, life interest trusts, care fee annuities, and proper estate planning. What doesn't work is simply giving everything away and hoping local authorities won't notice.

The most effective way to protect some inheritance whilst ensuring good care involves early planning with professional advice, honest arrangements that don't rely on hiding assets, and understanding what protections already exist in the care funding system.

Start planning before care is needed, use legitimate strategies, and get proper professional help. That gives you the best chance of protecting some assets for your children whilst ensuring you get the care you deserve when you need it.

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