A place in a care home costs an average of £1,200 per week, and nursing homes are even more expensive, averaging £1,400 per week. If you have more than £23,250 in capital, including savings, investments, or property, before Local Authorities provide any funding, they will conduct a means-tested assessment, and if your assets are above that figure then you will have to pay care home costs until it falls below it

Faced with the prospect of spending several years in care homes or nursing homes, it is no surprise that people often want to ringfence their assets for their loved ones and start researching ways to protect them

One ‘simple solution’ often promoted by unregulated ‘advisors’ is a lifetime property trust, but can you avoid care home fees with this trust?

Unfortunately, it’s not that simple. Whilst plenty of these unregulated ‘advisors’ claim lifetime property trusts can protect assets from care home fees, they rarely live up to this promise and will leave you thousands of pounds out of pocket

What is a lifetime property trust?

A lifetime property trust is a legal arrangement for managing property on behalf of beneficiaries. It can be an effective tool for protecting and managing property. It should not be confused with a trust that your Will can create

Qualified and regulated solicitors may suggest this trust based on your circumstances; however, they should make you aware that it is not a miracle fix for avoiding care fees. Trusts are complex, need to be carefully prepared and administered, and cannot be easily undone

Putting a house in a lifetime property trust to avoid care fees

Although trust schemes can work, their effectiveness cannot be guaranteed. Your local authority can challenge your exemption from paying care fees – for example, if it can show that a significant reason for you putting your property into trust was to avoid care costs and, at the time you did it, you had a reasonable expectation that you’d need care in the future. If they confirm that you did so, they will challenge the trust under the ‘Deprivation of Assets’ rules

Local authority guidance does say, however, that it would be unreasonable for the council to reach this conclusion if you were fit and healthy when you transferred the property

There is no fixed period for guaranteeing that your property and other assets are safe from these rules should you gift them away or place them into trust. Many people make the mistake of assuming the inheritance tax ‘seven-year rule’ applies to means testing for care funding, but that is incorrect, and your local authority can, and probably will, look back much further

Should your local authority decide you have deliberately deprived yourself of assets to avoid paying for your care, you will be treated as if you still own them when they carry out their means test

In addition to the deliberate deprivation rules, adverse tax consequences can also arise through this arrangement. If the value of the property being transferred into this trust exceeds the current inheritance tax allowance of £325,000, known as the Nil Rate Band, inheritance tax will be immediately payable on the part exceeding the lifetime inheritance tax rate of 20%. You must also cease to have any benefit from the property placed into this trust, and failure to do so will mean the value of that property will still remain in your estate for inheritance tax purposes, which is known as the ‘Gift of Reservation of Benefit Rules’. This highlights the importance of taking advice from a regulated solicitor to have a comprehensive understanding of this arrangement before proceeding

Can you avoid care home fees with a lifetime property trust?

If it sounds too good to be true, it most likely is. ‘Professionals’ are selling a dream advising clients to put their property into trust so that it cannot be taken into account for care home fee funding. Unfortunately, property trusts are not the miracle workers they are often sold as being, There are no guarantees they will work, and NMTBP warns you to be very, VERY wary of anyone promising you this miracle fix. In fact, these schemes may well become the next misselling scandal

Like all aspects of estate planning, your best option is to consult a qualified and regulated solicitor. They will be able to lay out all the options available to you, explain the pros and cons of each, and help you make the best and most informed decision for you and your loved ones

Bear in mind, also, that in truth, most people don’t go into care. Less than 15 per cent of people aged 85 and over live in residential care, and of those who do, the average length of stay is 2.3 years in a residential care home and 1.4 years in a nursing home