Protecting inheritance from care home fees

Care home fees can have a dramatic impact on what you leave behind, especially if most of your wealth is tied up in your home or savings. With people living longer and care costs rising—sometimes as much as £2,000 to £6,000 per month—many families worry about how much will be left for loved ones. It’s a common source of anxiety, and the reality is that even a modest estate can be quickly reduced if someone needs care for several years. But there are ways to plan ahead and soften the blow.

How the Means Test Works

When someone needs residential care, the local authority will assess their assets and income to decide who pays for care. For 2025–26, the main thresholds are:

  • If you have more than £23,250 in assets (including property), you pay the full cost of your care.

  • If your assets are between £14,250 and £23,250, you pay a contribution from your income and a “tariff” from your capital.

  • Below £14,250, only your income is considered.

The family home is usually included unless a spouse, partner, or certain relatives still live there. This can come as a shock, especially if the home was intended to be passed on to children.

Worked Examples: The Real Impact of Care Fees

  • Margaret owns a house worth £250,000 and has £40,000 in savings. She moves into a care home costing £3,500 per month (£42,000 per year). Her only child lives independently. The local authority includes both her home and savings in the means test, so Margaret pays the full cost of her care. If she lives in the care home for five years, her total care fees could reach £210,000. After paying these fees, there may be little left from her estate for her child, especially after selling the house to cover costs.

  • John rents his home and has £18,000 in savings. He enters a care home costing £2,500 per month (£30,000 per year). Because his assets are below the upper capital limit, he will pay a contribution from his income and a small “tariff” from his savings. If he lives in care for three years, his savings will be gradually reduced, but he will not be required to sell a home. The local authority will step in to cover more of the cost as his savings fall below the lower capital limit.

  • David and Sheila own a home worth £400,000 and have joint savings of £60,000. David needs residential care at £4,000 per month (£48,000 per year), while Sheila continues living at home. The value of the home is disregarded in the means test because Sheila still lives there. Only David’s share of the savings is assessed. He pays for his care from his income and savings, but the family home is protected as long as Sheila remains there. If David is in care for seven years, the savings may be depleted, but the home can still be passed on after both have died.

  • Evelyn owns a house worth £600,000 and has £100,000 in investments. She has no spouse or children living with her. She enters a care home costing £5,500 per month (£66,000 per year). Both her home and investments are included in the means test, so she pays the full cost. If she lives in care for ten years, her total fees could reach £660,000, potentially using up all her assets and leaving little or nothing for distant relatives or chosen beneficiaries.

  • Peter transferred his home to his daughter five years before needing care. The local authority investigates and decides this was “deliberate deprivation” to avoid care fees. They still include the value of the home in the means test, so Peter must pay the full cost of care. This can cause family tension, especially if the daughter believed the home was protected.

Common Pitfalls and Family Conflicts

  • Assuming gifts or trusts automatically protect assets—local authorities can challenge these.

  • Not realising the home is included if no spouse or dependent lives there.

  • Sibling disputes if one child receives a gift or moves in to “protect” the home.

  • Emotional strain between wanting to provide for loved ones and ensuring good care.

  • Failing to plan early—leaving decisions until care is urgently needed limits your options.

Forward Planning: What Can You Do?

While there’s no magic solution, there are practical steps you can take to reduce the risk of care fees eroding your children’s inheritance:

  1. Start Conversations Early
    Talk openly with your family about your wishes, your assets, and your concerns. Early planning gives you more options and helps avoid misunderstandings later.

  2. Review Your Will and Power of Attorney
    Make sure your will is up to date and reflects your wishes. Setting up a lasting power of attorney ensures someone you trust can make decisions if you lose capacity.

  3. Consider Property Ownership Arrangements
    If you own your home with someone else, changing from joint tenants to tenants in common allows you to leave your share to someone other than the co-owner. This can help protect part of the home’s value, but it’s not a guarantee against care fees.

  4. Understand the Rules on Gifting
    Gifts made many years before care is needed are less likely to be challenged, but there’s no fixed time limit. If the local authority believes you gave away assets to avoid care fees, they can still include them in the means test. Only make gifts you can afford, and keep clear records of your intentions.

  5. Explore Trusts with Caution
    Trusts can be useful for some families, especially where there are vulnerable beneficiaries, but they must be set up for genuine reasons—not just to avoid care costs. Seek advice on whether a trust is right for your situation.

  6. Check for NHS Continuing Healthcare
    In some cases, if care is needed primarily for health reasons, the NHS may cover the full cost. This is not means-tested, but the criteria are strict.

  7. Keep Good Records
    Document any gifts, changes in ownership, or major financial decisions. This can help if the local authority questions your intentions.

  8. Review Your Plan Regularly
    Life changes—marriage, divorce, bereavement, or a change in health—can all affect your estate and care needs. Review your arrangements every few years.

Why Planning Matters

The rules around care fees and inheritance are detailed and can change. The best approach is to plan early, keep clear records, and have open conversations with your family. Consider your priorities: protecting inheritance, ensuring quality care, and maintaining family harmony. There’s no one-size-fits-all answer, but understanding the system helps you make informed choices.


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Disclaimer: This blog post provides general information for educational purposes only. It is not legal advice. Outcomes can vary based on your personal circumstances and the evidence available.

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