How to Protect Your Home from Care Costs
How to Protect Your Home from Care Costs
June 10, 2025
Wondering how to finance your future care costs without sacrificing the family home?
Residential care fees are now averaging between £65,000-£80,000 a year in the UK – a significant investment that can quickly erode your estate if no plan is in place. For most of us, our home is not only our most valuable asset but also a source of emotional security. So, how can you approach long-term care funding in a way that safeguards, rather than sacrifices, your assets?
This guide explores how to protect your home from care costs, so you can ensure your property remains intact for future generations to enjoy.
Legal Strategies to Protect Your Home
Tenants in Common and Lifetime Interest Trusts
One way to seek to protect potentially half of your home from care costs is to restructure your property ownership. Most couples own their home as joint tenants, meaning the property automatically passes to the surviving partner upon death. However, if you change the ownership to tenants in common, each of you will own a specific share of the property (usually 50%), which prevents your share from being used to pay for your partner’s care home fees.
Once you become tenants in common, each of you can then write a will that places your share of the property into a Life Interest Trust. The surviving spouse still has the legal right to remain in the home, but the ownership of your share will be preserved for your beneficiaries (usually your children). If the surviving partner later requires residential care, only their share of the property will be considered in the financial assessment – meaning the half held in the trust will be protected from care home fees.
Exploring Long-Term Care Funding Options
There are several financial products and agreements that can help you manage the costs of long-term care services. These include:
1) Deferred Payment Agreements
If most of your assets are held in your home and you’re not ready to sell it yet, your local authority may offer you a Deferred Payment Agreement (DPA). This is effectively a loan secured against your property. The council will pay for your long-term care costs upfront, and you’ll be required to repay them at a later date – usually after your home is sold. This can give you valuable breathing space during such a challenging time in your life.
However, it’s important that you understand the terms involved and how this type of agreement might affect your estate in the long term.
2) Long Term Care Annuities
Care annuities, also known as immediate needs annuities or impaired life annuities, provide a guaranteed income stream to cover the costs of lifetime care. You pay a one-off lump sum to an insurance provider, who will then commit to paying a fixed, tax-free amount directly to your care provider. The amount required for your insurance premium will depend on several factors, including your age, health, and level of care needed. These annuities provide reassurance that your care fees will be covered regardless of how long you live, helping to protect your assets.
We recommend seeking professional advice before taking out a care annuity, as the upfront payment is non-refundable.
3) Equity Release
If you’re over 55, equity release can help to unlock the value of your property without needing to move. There are two main types of equity release available: lifetime mortgages and home reversion plans. With a lifetime mortgage, you borrow money against the value of your home, and interest adds up over time. With a home reversion plan, you sell part or all of your property to a provider in return for a lump sum or regular payments.
However, these schemes can reduce the value of your estate and may affect your entitlement to benefits, so it’s vital to obtain professional advice before proceeding.
How Piercefield Oliver Can Help with Financial Planning for Care
Protecting your home from care costs can be a complex process. At Piercefield Oliver, we help individuals and families fund long-term care expenses in a way that successfully safeguards their assets.
Our expert financial advisers are highly experienced in navigating the complexities of long-term care funding and inheritance tax. We begin by gaining a clear understanding of your circumstances, including your property ownership structure and family priorities. We’ll then create a personalised financial strategy to ensure your property remains intact, which could include restructuring how your home is owned, setting up appropriate trusts, or creating a will that clearly reflects your intentions.
Book your free 30-minute consultation with one of our financial advisers to discover how financial planning for care can work for you or your family member.
Louise Oliver
Founding Partner
Piercefield Oliver
Frequently Asked Questions
Eligibility for CHC funding is based on a primary health need, assessed through four key indicators: nature, intensity, complexity, and unpredictability of your health condition.
If your savings drop below £23,250, you can request a financial assessment from your local council. If eligible, they may contribute to your care costs. However, you might need to move to a more affordable care home unless a third party can pay a top-up fee.
Not entirely. During the first 12 weeks of permanent residency in a care home, the value of your property is disregarded in financial assessments, potentially qualifying you for local authority support. However, you may still need to contribute based on other income and assets.
Transferring your home to your children doesn’t guarantee exemption from care fees. If the local authority deems it a deliberate deprivation of assets, they may still include its value in assessments. Always seek legal advice before making such decisions.
It’s important to factor potential long term care costs into your financial planning. Undertaking a cash flow forecast that incorporates potential costs can be invaluable, as it can take away the fear of the future and allow you to focus on living. Early financial planning and consulting with a specialist adviser can help protect your assets and ensure appropriate care.
A deferred payment agreement allows you to use your property to fund care home costs without selling it immediately. The local authority pays your fees, and the amount is repaid later, usually from the sale of your home. Interest may accrue on the loan.