Can I Avoid Care Home Fees by Releasing Equity?

Reducing Your Assets with Equity Release to Avoid Care Home Fees

This is a minefield area, so you need to be very careful before considering releasing equity from your house with the aim of avoiding care home fees.

Each part of the UK has a different threshold when it comes to paying for care. In England, this figure is £23,250. If you have income or capital above this threshold, you usually have to meet the cost of all of your care yourself.

This will include your house, unless it’s still occupied by:

• Your partner or former partner, unless they are estranged from you
• Your estranged or divorced partner, if they’re also a lone parent
• A relative aged 60+
• A child of yours under 18
• A relative who is disabled.

You could opt to release equity so there’s less value in your home to try and avoid care home fees, but if you do so and keep the money then that money will also be counted as part if your assets anyway.

If you release equity from your home and give the money away to your children before entering care, you may be regarded by the local authority as having deliberately deprived yourself of assets.

This can result in a ruling where you’re treated as still having the cash and therefore are still liable to pay the care home fees, even after you’ve given the money away. This is especially the case if you gave away the cash at or shortly before the time it becomes apparent you would need to move into care.

Immediate Needs Annuities

One option to pay for care at the time you need it is to take out an immediate needs annuity. You can pay for this from pension cash or from cash from another source, such as savings. The idea is that it provides a regular income to pay for care home fees.

With the care home fees covered by the annuity income, capital can be preserved elsewhere. You could release equity from your home to buy an immediate needs annuity, ring-fencing a proportion of your home to leave to your children.