How Care Fees Can Erode an Estate

If someone requires long-term care in a care home, the cost can be substantial and this can have major implications for their estate and for those who hope to inherit. Below we walk through how the system works in England and Wales, how much it typically costs, and why estate planning is so important in this area.

Who Pays What?

England

• In England, if a person goes into a care home and requires residential (non-nursing) care, the local authority will carry out two assessments: a needs assessment (to check the level of care needed) and a financial assessment (to check how much the person can pay).

• If their capital (savings + investments, and sometimes property) is over £23,250, then they are expected to pay all their care home fees themselves (i.e., they become a “self-funding” resident).

• If capital is between £14,250 and £23,250, the local authority will cover some costs, and the person pays a “tariff income” (an assumed income from capital) plus contributions from income.

• If capital is under £14,250 then the person tends to only pay from income; the local authority contributes the rest.

  
  

Wales

• In Wales the rules are somewhat different. For care home funding, if someone has capital above £50,000, they may need to fund their own residential care.

• The value of the home may or may not be included depending on who lives there and other circumstances (for example if a spouse, child under 18 or disabled relative remains living there) which can give protection.

  
  

What Does “Self-funding” Mean?

If a person is self-funding their care home place, the fees are paid out of their own resources: savings, investments, income, property proceeds (if sold) and eventually their estate. This means that the longer someone lives in care, and the higher the weekly fees, the more rapidly their estate can be consumed.

How Much Are We Talking About?

The actual weekly fees vary widely depending on location, type of care (residential vs nursing vs dementia care) and service level (room quality, private vs standard, etc). Here are some recent figures:

• According to Age UK, the average cost in England for a place in a care home was around £949/week for residential care, and £1,267/week for a nursing home.

• Another source puts the average cost of self-funded residential care in the UK at around £1,406/week.

• The provider Bupa Care Services states that care-home fees can range from £925 to £2,828 per week, depending on location and level of care.

• In Wales: average weekly cost of a care home is about £1,156/week, and nursing home around £1,394/week.

  
  

To put that in annual terms: a weekly fee of £1,000 translates into about £52,000 a year. Given lifespans and time spent in care, this can erode an estate very significantly.

How Care Fees Impact the Estate

Care fees may reduce the assets that you leave behind to heirs and may force the sale of property or other assets.

Here are some mechanisms:

• The person may need to sell their home or use proceeds from it to pay care fees (or enter into a deferred payment agreement with the local authority).

• Capital (e.g., savings, investments) will be used to pay the weekly fees. Every week the aggregate drains further.

• If assets fall below the threshold (e.g., in England the £23,250) then the local authority may step in – but by then much of the estate may have been consumed.

• The home may be excluded from assessment in some circumstances (e.g., spouse still living there, dependent child) but not always – meaning it may form part of the capital counted.

• Because the estate is reduced, the inheritance that passes to beneficiaries is reduced. This may also interact with inheritance tax planning (less value means less tax, but also less to leave behind).

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Why This Area Is a Huge Risk & What to Watch Out For

1. Unexpectedly high cost + increasing lifespans

Care home fees continue to rise and people are living longer. So the total cost can be far larger than many expect. For instance, some articles suggest the “care bill lottery” could lead to bills approaching £1 million in some cases.

2. Timing matters

The age at which someone moves into care, and how many years they spend there, matters a great deal, the earlier the move, the more time there is for fees to drain the estate.

3. Property risk

Often the main asset someone has is their home. If the home has to be sold to pay fees, it may mean little or nothing is left for beneficiaries.

4. Complex rules and means testing

The rules around inclusion of property, timing of the assessment, deferred payment agreements, “tariff income” and deprivation of assets (i.e., giving away assets to avoid care fees) are all complex. Mistakes or assumptions can be costly.

Final Thought

If someone in England or Wales goes into long-term residential or nursing care and has to fund it themselves, care home fees can rapidly eat into their estate. The combination of high weekly costs, potentially long stays, means-testing thresholds and the inclusion of property makes it an area where people who think “I’ll be fine, my home will cover it” can be surprised.

For anyone concerned about leaving something behind for their loved ones, or for those who will care for someone entering care, it’s wise to factor this risk into your estate plan. The earlier you consider it, the more options you have.