Can a trust protect your home from care home fees?

Care home fees are one of the largest financial risks facing families in later life. With residential care costs in the UK running to tens of thousands of pounds per year, many families ask whether a trust can protect their home from being used to pay those fees.

The answer is nuanced and depends significantly on the timing and purpose of any arrangement. It is an area where getting proper advice is essential, because the rules are more complex than many people realise.

How care funding assessments work

Local authorities carry out means tests to determine how much of your care costs you are expected to fund yourself. Your capital and assets are assessed, with the main threshold currently being £23,250 in England. If your assets exceed this, you are expected to contribute to the cost of your care.

Your home is generally included in this assessment if you move into residential care and no qualifying relative remains living there.

Deliberate deprivation of assets

Local authorities have the power to treat you as still owning assets that you have transferred away if they conclude that the transfer was made with the intention of avoiding care fees. This is called deliberate deprivation.

Crucially, there is no fixed look-back period for deliberate deprivation in the same way as the seven-year rule for inheritance tax. Local authorities can look back as far as they consider relevant if there is evidence of intentional deprivation.

What a properly structured trust may be able to do

A trust that was set up for legitimate reasons, well in advance of any care needs arising, may provide some protection. The key factors are the purpose of the trust, the timing of its creation, and the circumstances at the time.

Setting up a trust in your fifties in good health, for reasons including asset protection from divorce or inheritance tax planning, is a very different situation from setting up a trust at 80 when you are already receiving a care needs assessment.

What an asset protection trust cannot do

• It cannot guarantee protection from care fee assessments in all circumstances
• A trust created specifically to avoid care costs is likely to be treated as deliberate deprivation
• Timing matters: the closer the transfer to a care need, the more likely it will be scrutinised
• You cannot continue to live in your home rent-free after putting it in trust without gift with reservation of benefit applying for inheritance tax purposes
• Local authorities have experienced financial assessment teams who look at trust arrangements carefully

Taking the right approach

If asset protection is a genuine concern for your family, a conversation with a qualified specialist who understands both trust law and local authority care funding rules is worth having early. The earlier you plan, the more genuine options are available.

Be cautious of any adviser who tells you a trust will definitively protect your assets from care fees. The legal position is more uncertain than that, and local authorities have successfully challenged many such arrangements.

Devonshire Wealth connects families with trust planning specialists who can give you an honest assessment of the options available. Visit our asset protection trusts page to find a specialist who understands the care funding rules.