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How to Prepare for Care Home Costs in the UK (2025 Guide)

· 14 min

Note: The following scenario is fictional and used for illustration.

Margaret, 68, a retired teacher from Leeds, owned a £320,000 home with her husband David for 35 years. When David died unexpectedly in 2022, the property automatically passed to Margaret as joint tenants. Two years later, Margaret developed vascular dementia and entered residential care costing £1,350 per week (£70,200 per year). With £42,000 in savings plus the entire £320,000 property, Margaret faced the reality that her care fees would consume everything within four to five years.

Her two children would inherit nothing.

The tragedy? If David's will had included a Life Interest Trust for his half of the property, only Margaret's £160,000 share would be assessed for care fees. The children's £160,000 inheritance would have been protected.

Margaret's story isn't unusual. The average cost of residential care in the UK is £1,291 per week (£67,132 per year) for self-funders, while nursing care costs approximately £1,410 per week (£73,320 per year). Without proper planning, life savings and family homes disappear within a few years.

This guide explains how to prepare financially for potential care home costs, protect assets legally, and ensure your family isn't forced to lose their inheritance to fund your care.

Table of Contents

Understanding UK Care Home Costs in 2025

Care home costs in the UK have risen significantly in recent years, creating a substantial financial burden for families. The average weekly cost of residential care is £1,291 for self-funders (£67,132 per year), while nursing care reaches £1,410 per week (£73,320 per year). Specialist dementia nursing care costs even more at £1,585 per week (£82,420 per year).

Regional variations are striking. In the North East, care home costs average £1,076 per week (£55,952 per year). Yorkshire and the East Midlands see costs between £1,000 and £1,200 per week. The South East averages around £50,000 per year. London tops the scale at £1,710 per week (£88,920 per year).

Self-funders pay substantially more than council-funded residents. According to industry analysis, councils pay £908 per week on average for residential care, while private residents are charged £1,278—a £370 difference per week.

James, 72, recently entered nursing care in Manchester at £1,350 per week. With £180,000 in savings and property, his assets will be depleted in approximately 2.5 to 3 years at current rates. His situation represents the reality for over 400,000 people currently living in UK care homes, with almost half being self-funders.

Understanding these costs is essential context. Care home fees rise faster than inflation—averaging 5% to 8% annually—driven by National Living Wage increases and operational expenses. The average length of stay ranges from 2 to 3 years, though many residents remain in care for 5 to 10 years or longer.

The difference between residential care and nursing care matters financially. Residential care provides personal care assistance (washing, dressing, eating). Nursing care includes registered nurse presence 24/7 for residents with complex medical needs. Specialist dementia care commands premium pricing due to higher staff ratios and specialized training requirements.

Understanding the costs is step one. Step two is understanding how the government decides whether you pay these costs or they do.

How the Means Test Determines What You Pay

The means test determines your contribution to care home fees based on your capital and income. For 2025-2026 in England, three capital thresholds determine what you pay.

Below £14,250 (lower capital limit), the local authority pays your full care home fees. You contribute only what you can afford from your income, minus the Personal Expenses Allowance of £30.65 per week—money you keep for personal spending.

Between £14,250 and £23,250, you pay a tariff income contribution. For every £250 of capital above £14,250, you pay £1 per week toward care costs. The council contributes the remainder, but you also pay from your pension income.

Above £23,250 (upper capital limit), you pay the full cost of care. No council funding is available until your assets drop below this threshold.

Sarah has £18,000 in savings. Her excess capital is £18,000 minus £14,250, which equals £3,750. Divided by £250, that's 15 units. She pays £15 per week tariff income contribution. The council pays the rest of her care home fees, though Sarah must also contribute from her pension income.

These thresholds apply only in England. Scotland, Wales, and Northern Ireland operate different systems with different capital limits.

The financial assessment examines both capital (savings, property, investments) and income (state pension, private pensions, benefits, rental income). Your local authority Adult Social Care team conducts the means test when you enter care and reassesses annually. As your assets deplete below thresholds, the council increases its contribution.

Robert, 75, entered care with £35,000 in savings and paid full fees of £1,350 per week. After 18 months, his assets dropped to £22,000—below the £23,250 threshold. The council now contributes to his care costs, though Robert still pays tariff income of £31 per week (calculated from his capital between £14,250 and £22,000).

Income assessment includes state pension, private pensions, annuities, and rental income from property you own but don't occupy. You keep the Personal Expenses Allowance regardless of your capital level, ensuring you have funds for clothing, toiletries, and personal items.

So which assets does the council actually count in this calculation? The answer might surprise you.

What Counts as Assets in the Means Test?

The means test includes most capital you own but disregards specific assets. Understanding what counts helps you plan effectively and avoid unpleasant surprises.

Assets included in the means test:

  • Cash savings (bank accounts, ISAs, premium bonds, building society accounts)
  • Property (your home, buy-to-let properties, second homes, holiday cottages)
  • Investments (stocks, shares, bonds, unit trusts, investment funds)
  • Capital value of annuities or trust funds you can access
  • Your share of jointly owned assets
  • Life insurance policies with surrender value payable to you

Assets excluded from the means test:

  • Personal possessions (furniture, clothing, jewelry, car)
  • Surrender value of life insurance policies paid to someone else
  • Property your spouse or civil partner still lives in
  • Property occupied by a disabled relative or relative aged 60 or over who lived with you before you entered care
  • Certain trust funds (depending on trust type and whether you control the assets)
  • Compensation payments for personal injury held in trust

The council values your home at market value, not the price you paid decades ago. If you own property jointly, only your share is assessed. Joint tenants typically own 50% each, though proportions can vary.

Many people mistakenly believe giving away their home to children will protect it. This is deliberate deprivation, and councils treat you as still owning the gifted asset.

Linda, 70, gifted her £250,000 home to her daughter in 2023. In 2024, she needed care. Under Section 70 of the Care Act 2014, the council assessed Linda as still owning £250,000 and pursued her daughter for £1,300 per week in care fees until the gifted value was exhausted.

Your home is usually your biggest asset—but there are specific rules about when it's counted and when it isn't.

The 12-Week Property Disregard and When Your Home Is Excluded

The 12-week property disregard offers temporary protection when you enter permanent care home residence. For the first 12 weeks, the council excludes your property value from the means test, giving you time to decide whether to sell, rent out, or arrange a Deferred Payment Agreement.

During these 12 weeks, you still contribute from other capital and income. The disregard applies only to your main residence, not second homes or buy-to-let properties.

Peter entered care in January 2025. He owns a £280,000 house and has £15,000 in savings. For the first 12 weeks, only his £15,000 is assessed. He falls below the £23,250 threshold, so the council contributes to his fees. After 12 weeks, the full £295,000 is assessed and he pays full fees.

Your home is permanently disregarded (never counted) if it remains occupied by:

  • Your spouse or civil partner
  • Your unmarried partner who was cohabiting before you entered care
  • A relative aged 60 or over who lived with you before care began
  • A relative under 60 who is disabled or incapacitated
  • A child under 16 you're responsible for supporting

Local authorities have discretion to disregard property occupied by a long-term carer, though this requires approval.

If your spouse still lives in the property, it's disregarded entirely with no 12-week limit and no means test inclusion. This is a critical protection for married couples.

Margaret and Tom owned a £350,000 home as joint tenants. When Margaret needed care, Tom continued living there. The property was fully disregarded. Margaret's care fees were assessed only on her savings and income. If Tom dies and Margaret remains alive and in care, the property then becomes assessable (unless children qualify for disregard).

The property disregard depends entirely on who occupies your home:

Situation Property Counted? Explanation
Spouse still living there No Permanently disregarded
Empty property (first 12 weeks) No 12-week disregard applies
Empty property (after 12 weeks) Yes Full value assessed
Adult child under 60 (not disabled) lives there Yes Doesn't qualify for disregard
Disabled adult child lives there No Permanently disregarded

Many people panic and try to give away their home or assets before needing care. This is almost always a catastrophic mistake.

Deliberate Deprivation of Assets: What You Must Never Do

Deliberate deprivation of assets under Regulation 17 of the Care and Support Regulations 2014 occurs when you reduce your assets to avoid care fees. This is one of the most serious mistakes families make when planning for care costs.

Deliberate deprivation includes:

  • Gifting large sums of money to children or relatives
  • Transferring property ownership to family members
  • Placing assets in certain types of trusts shortly before needing care
  • Making extravagant purchases (luxury cars, expensive holidays) to reduce assessed capital
  • Loaning money to family with no genuine intention of repayment

The legal test doesn't require avoiding care fees to be your main reason for the gift. The council only needs to show it was a significant motivating factor. They ask three questions:

  1. Did you have a reasonable expectation of needing care when you made the gift?
  2. Could you reasonably expect to need to pay for care?
  3. What was the timing of the disposal relative to care needs?

The "7-year rule" from inheritance tax does not apply to care fees. This is a critical misconception. For inheritance tax, gifts become exempt if you survive 7 years. For care fees, no time limit exists whatsoever. Councils can investigate gifts made 10, 15, even 20 years ago if deliberate deprivation is suspected.

People confuse these frameworks because both involve estate planning, but they're completely separate legal systems with different rules.

Legal consequences of deliberate deprivation are severe:

For you, the council treats you as still owning the gifted assets and charges you accordingly. This creates debt that accumulates with interest.

For gift recipients, under Section 70 of the Care Act 2014, the council can pursue the person who received the asset to recover care costs up to the value they received. No time limit applies to council investigations. Unpaid care fees accrue interest, and councils can pursue recovery through County Court.

David, 68, gifted his £300,000 home to his son in March 2024. David was diagnosed with Alzheimer's in June 2024—just three months later. He entered care in September 2024, six months after making the gift.

The council investigated. Was David in good health when gifting? No—early dementia symptoms were documented by his GP. The council assessed David as owning £300,000. They billed his son £1,400 per week under Section 70 until £300,000 was exhausted, plus legal costs and interest.

Contrast this with a legitimate gift. Susan, 55, gifted £50,000 to her daughter for a house deposit in 2020. Susan was fit, healthy, employed, with no care needs anticipated. She developed multiple sclerosis in 2028 (eight years later) and needed care in 2030.

The gift was likely not deliberate deprivation because it was made when Susan was healthy, for a legitimate purpose, and long before any care needs arose.

The council investigates several factors:

  • Your health at the time of the gift
  • Whether you kept enough assets to live on
  • The stated purpose for the gift
  • Timing relative to care needs arising
  • Whether you received independent legal or financial advice
  • Your understanding of care costs and means testing

Evidence matters. Keep documentation of gifts, their purpose, medical records from the time, and professional advice received.

So if deliberate deprivation is illegal, what can you legally do to protect assets? The answer lies in proactive estate planning, not last-minute gifting.

Legitimate asset protection requires planning years before care is needed, not reactive gifting when care is imminent.

A Life Interest Trust (also called a Right to Reside Trust) allows you to:

  • Leave your share of property to your children in your will
  • Give your spouse the right to live there during their lifetime
  • Protect your half from being assessed for their care fees

You and your spouse own property as tenants in common (50/50 or other split). Your will creates a Life Interest Trust for your 50% share. When you die, your spouse can live in the property, but they don't own your half. If your spouse later needs care, only their 50% is assessed. Your 50% is protected for children.

Consider a house worth £400,000, owned 50/50 as tenants in common. The husband dies and his will creates a Life Interest Trust for his £200,000 share. The wife continues living there with her life interest. Five years later, she develops dementia and needs care.

Only her £200,000 share is assessed for care fees. The husband's £200,000 is protected for children. The family preserves £200,000 inheritance instead of losing the entire £400,000 to care fees.

This planning must be done via will before death. Attorneys cannot create Life Interest Trusts after you lose capacity.

Most couples own property as joint tenants, meaning ownership automatically passes to the survivor. This means the surviving spouse owns 100%, and all of it gets assessed for care fees. Converting to tenants in common allows the Life Interest Trust strategy.

You sever the joint tenancy via Form SEV at Land Registry or through a solicitor. Do this now, while both spouses have capacity. Once capacity is lost, options disappear.

Lasting Powers of Attorney matter critically for care planning. Attorneys have very limited power to gift or restructure assets. Court permission is required for significant gifts and is rarely granted for care fee avoidance. Once you lack capacity, asset protection options disappear.

LPAs allow attorneys to access funds, manage property sales, and arrange Deferred Payment Agreements. Registration fees increased from £82 to £92 per LPA effective 17 November 2025. Total cost for Property and Financial Affairs plus Health and Welfare LPAs is £184.

Gifting can be legitimate if made when you're healthy with no expectation of care needs, made for genuine reasons (wedding gift, house deposit, debt repayment), you retain enough assets to live on, made many years before care is needed, and documented with evidence of purpose and timing.

Even legitimate gifts can be investigated. Keep records, seek legal advice, and ensure genuine motivation beyond care fee avoidance.

Some families consider insurance-based solutions like immediate needs annuities (convert lump sum into guaranteed care income) or long-term care insurance (limited availability in UK with high premiums). Equity release allows you to use property value to pay fees while retaining ownership. These are complex financial products requiring FCA-regulated advice.

Never gift your home to children shortly before needing care. Never create lifetime property trusts without legal advice due to high deliberate deprivation risk. Never make large purchases just to reduce capital before care. Never transfer property into children's names—you risk inheritance tax issues, their divorce proceedings, and their bankruptcy affecting your home.

The most powerful tool for protecting assets is a properly structured will. Here's exactly how to do it.

How to Structure Your Will to Protect Your Family's Inheritance

Before drafting your will, determine your property ownership. Joint tenants means property automatically passes to the survivor, bypassing your will entirely. Tenants in common means each owns a defined share (50/50, 60/40, or other proportions), and your share passes via your will.

If you currently own as joint tenants, sever to become tenants in common using Form SEV at Land Registry or via a solicitor.

Your will should include a Life Interest Trust (Property Protection Trust) stating:

  1. Your share of the property passes into a Life Interest Trust
  2. Your spouse has the right to live there for their lifetime (beneficiary of the trust)
  3. After your spouse's death, your share passes to your children (remaindermen)
  4. Trustees (often your spouse plus adult children) manage the trust

Sample will language:

"I give my share of the property known as [address] to my Trustees to hold on trust for my spouse [name] for their lifetime, with the right to reside in the property. After my spouse's death, the property shall pass to my children [names] in equal shares."

The key benefit is your spouse doesn't own your share—they have a right to use it. The council cannot assess assets your spouse doesn't own.

Trustees manage the Life Interest Trust. Typically you appoint your spouse (if they have capacity), one or two adult children, or a professional trustee for complex estates.

Trustee responsibilities include maintaining the property during your spouse's lifetime, deciding on property sale if your spouse moves to care (with proceeds held in trust), ensuring your spouse's life interest is honored, and distributing trust assets to children after your spouse's death.

Consider including a letter of wishes—a non-binding document explaining why you created the Life Interest Trust (care fee protection), your wishes for property maintenance and sale, and guidance for trustees on balancing your spouse's needs and children's inheritance.

Update your will when property value changes significantly, you move house, relationships change (divorce, remarriage), children's circumstances change, or Care Act legislation changes.

James and Helen, both 65, owned a £450,000 home as joint tenants with combined savings of £80,000 and two adult children. They took four steps:

  1. Severed joint tenancy to become tenants in common (50/50)
  2. Both created wills with Life Interest Trusts for their £225,000 shares
  3. Appointed each other plus their eldest child as trustees
  4. Set up Property and Financial Affairs LPAs

When James died at 72, Helen continued living in the property with a life interest in James's £225,000 share. James's share was held in trust for their children.

When Helen needed care at 78, only Helen's £225,000 share plus £40,000 remaining savings (£265,000 total) was assessed. James's £225,000 share was protected, not counted in the means test. The family preserved £225,000 inheritance for children.

Without the trust, the entire £450,000 property would have been assessed for Helen's care. All assets would have been depleted within 3 to 4 years. Their children would have inherited nothing.

These protective strategies are accessible through various means, allowing families to implement them without prohibitive costs. Proper estate planning creates a foundation for care cost protection.

Wills protect assets after death. But what about protecting your interests while you're alive? That's where Lasting Powers of Attorney become essential.

Why Lasting Powers of Attorney Are Essential for Care Planning

Two types of Lasting Powers of Attorney exist: Property and Financial Affairs LPA manages money, property, bills, and investments. Health and Welfare LPA makes medical and care decisions, activating only when you lack capacity.

Without LPA, family cannot access your bank accounts to pay care fees. They cannot sell your property to fund care. The Court of Protection must appoint a deputy, a process taking 6 to 12 months and costing £3,000 or more. Deputies have even less power than attorneys to make gifts or restructure assets.

With LPA, attorneys can arrange care funding immediately, apply for Deferred Payment Agreements, sell property if necessary with proper authority, and manage income to pay care fees. However, they cannot make large gifts or restructure assets for care fee avoidance—their authority is limited by law.

LPAs must be created while you have mental capacity. Once dementia or capacity loss occurs, it's too late. Court of Protection involvement becomes mandatory. The average age of dementia diagnosis ranges from 79 to 82. Create LPAs in your 50s or 60s while healthy.

Patricia, 76, developed sudden dementia with no LPA in place. Her daughter could not access Patricia's £45,000 savings to pay care fees. The daughter applied to Court of Protection for deputyship, waiting 8 months at a cost of £3,200. Meanwhile, care home bills accumulated at £5,200 per month unpaid, creating debt and distress.

LPA costs for 2025 are £92 per LPA registration (increased from £82 in November 2025). Total for both LPAs is £184. Exemptions are available for people on certain benefits.

Attorneys cannot make large gifts without court permission, create trusts on your behalf, transfer property to themselves or family members, deliberately deprive you of assets, or do anything primarily for their benefit rather than yours.

LPAs protect you during incapacity. Wills protect your estate after death. You need both.

If you don't want to sell your property immediately to pay care fees, there's one more option: Deferred Payment Agreements.

Deferred Payment Agreements: Delaying Property Sales

A Deferred Payment Agreement (DPA) is a loan from your local council to pay care home fees, secured against your property. It allows you to defer payment until your property is sold, your death (repaid from your estate), or you choose to repay early.

The council pays your care fees directly to the care home. Debt accumulates against your property value. Interest is charged (current rates range from 1.55% to 2.65% annually, varying by council). Councils require an equity cushion—usually 10%—meaning they won't lend against 100% of property value. When your property sells, the council recoups the loan plus interest.

You qualify if your property is included in the means test (empty or only non-qualifying relatives live there), property value exceeds the council's lower limit (typically £100,000 or more), you have less than £23,250 in other capital, and the property is in the UK with you having legal authority to sell it.

Setup fees range from £150 to £500 depending on council. Annual interest typically sits at 2.3%—much lower than commercial loans. Legal fees if required cost £300 to £800.

Alan, 80, entered care at £1,400 per week. He owned a £280,000 property and had £12,000 in savings. He didn't want to sell immediately, hoping to return home. He arranged a DPA with his council.

The council paid £72,800 per year in care fees. After 3 years, his debt reached £218,400 including interest at 2.3%. His property sold for £280,000. The council took £218,400, leaving £61,600 for his estate.

DPAs offer advantages: no forced immediate sale, time to achieve better property price, low interest rates, and preservation of some inheritance.

Disadvantages include interest accumulation reducing inheritance, council charge on property impacting any sale, equity cushion requirement preventing borrowing full value, and availability only through local councils, not private lenders.

These are the core strategies for preparing for care costs. Proper planning now protects your family later.

Frequently Asked Questions

Q: What is the average cost of a care home in the UK in 2025?

A: The average cost of residential care in the UK is £1,291 per week (£67,132 per year) for self-funders. Nursing care costs approximately £1,410 per week (£73,320 per year), with specialist dementia nursing care averaging £1,585 per week (£82,420 per year). Regional variations are significant—costs range from £1,076 per week in the North East to £1,710 per week in London.

Q: How much savings can I have before paying for care home fees?

A: If you have assets (including your home) worth more than £23,250, you'll pay the full cost of care. Between £14,250 and £23,250, you'll contribute £1 per week for every £250 of capital toward care costs. Below £14,250, the local authority pays the fees. These thresholds apply in England; Scotland, Wales, and Northern Ireland have different rules.

Q: What is deliberate deprivation of assets for care home fees?

A: Deliberate deprivation occurs when you reduce your assets (through gifts, property transfers, or trusts) to avoid care home fees. Local authorities can treat you as still owning assets you deliberately deprived yourself of. There's no time limit on how far back councils can investigate, and the '7-year rule' from inheritance tax doesn't apply to care fees.

Q: Will my house be taken to pay for care home fees?

A: Your property is included in the means test if it's not occupied by a spouse, partner, relative over 60, or disabled relative. However, you're not forced to sell immediately—you can use a Deferred Payment Agreement (loan secured against your property) or receive a 12-week property disregard period to decide your options. If your spouse still lives there, the property is disregarded entirely.

Q: How can I protect my assets from care home fees legally?

A: Legal protection strategies include creating Life Interest Trusts in your will (protecting half your property for children after your spouse's death), setting up Lasting Powers of Attorney early (before capacity is lost), and proper estate planning well in advance of needing care. However, avoid deliberate deprivation—gifting assets shortly before needing care can backfire, with councils still counting those assets and potentially pursuing gift recipients for fees.

Q: What is the 12-week property disregard for care home fees?

A: The 12-week property disregard temporarily excludes your home's value from the means test for the first 12 weeks of permanent care home residence. This gives you time to decide whether to sell, rent out, or arrange a Deferred Payment Agreement. After 12 weeks, the property value is included in your assessment unless it qualifies for permanent disregard (e.g., your spouse lives there).

Q: Should I include care fee planning in my will?

A: Yes. A well-drafted will with protective trusts can safeguard assets for your children while allowing your spouse to benefit during their lifetime. Life Interest Trusts ensure only your spouse's share of assets is assessed for their care fees, not yours. This planning must be done proactively—attorneys under Lasting Powers of Attorney have very limited ability to restructure assets once you lack capacity.

Conclusion

Key takeaways:

  • Act now, not later—asset protection strategies only work when implemented before care is needed, as attorneys cannot restructure assets after capacity is lost
  • Sever joint tenancy and convert to tenants in common to enable Life Interest Trust protection for your share of property
  • Update your will to include Life Interest Trusts protecting your share of property for your children while allowing your spouse to benefit
  • Set up LPAs immediately—create Property and Financial Affairs and Health and Welfare LPAs while you have capacity (£184 total cost for 2025)
  • Avoid deliberate deprivation—never gift assets or transfer property shortly before needing care, as councils will investigate and pursue recipients

Care costs feel overwhelming, but preparation removes the panic. Margaret's story, where her children lost their entire inheritance, could have been different with a will containing a Life Interest Trust. You can't predict the future, but you can protect your family from losing everything to care fees. The difference between a protected estate and a depleted one isn't luck—it's planning.

Need Help with Your Will?

Understanding how to protect your assets from care home fees is essential, but protection only works if it's built into your will before you need care. Life Interest Trusts and proper estate planning give your family the best chance to preserve inheritance while ensuring quality care.

Create your will with confidence using WUHLD's guided platform. For just £99.99, you'll get your complete will (legally binding when properly executed and witnessed) plus three expert guides. Preview your will free before paying anything—no credit card required.

Legal Disclaimer: This article provides general information only and does not constitute legal or financial advice. WUHLD is not a law firm and does not provide legal advice. Laws and guidance change and their application depends on your circumstances. For advice about your situation, consult a qualified solicitor or regulated professional. Unless stated otherwise, information relates to England and Wales.

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