Protecting Your Estate from UK Care Home Costs

The prospect of significant care home costs is one of the most pressing financial concerns for families approaching later life. Unlike the NHS — which provides healthcare free at the point of use — residential and nursing care in England is means-tested. If your assets exceed the threshold, you fund your own care.

This guide explains how the means test works, what the legitimate planning options are, the "deprivation of assets" rule that limits aggressive planning, and the critical — but little-known — NHS Continuing Healthcare route that can fund care entirely.

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How the Means Test Works in England

The social care means test in England (note: Scotland, Wales, and Northern Ireland operate different rules — confirm the local rules for your planning) operates as follows:

The capital threshold (verify current figures): if your assessable capital exceeds £23,250 (the upper threshold, as at 2026 — this figure is subject to periodic government review and should be confirmed with the local authority), you are "self-funding" — you pay the full cost of care.

The lower threshold: if your assets fall below £14,250 (verify current figure), the local authority funds the full assessed cost of your care (subject to their standard care package — they will not fund premium care beyond their assessed standard cost without a "top-up" arrangement).

Between the thresholds: for assets between £14,250 and £23,250, the local authority funds part of the cost; you contribute £1 per week for every £250 of capital between the lower and upper threshold.

The care cost: residential care (non-nursing) averages £800–£1,200 per week in England as at 2026 (verify regional rates). Nursing care is higher — often £1,100–£1,600 per week. In London and the South East, costs are materially above the national average. This is approximately £50,000–£80,000 per year for residential care, rising to £70,000–£100,000 or more for nursing care.

The duration risk: the average length of stay in a care home is approximately two to three years, but many residents remain for five to ten years. A stroke or dementia diagnosis in the late 60s or early 70s can result in a care need lasting 15+ years. Over such a period, the cost can exceed £1 million.

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What Is Included in the Means Test?

Assessable capital includes:

• Cash and bank accounts.
• Savings accounts, cash ISAs, and fixed-term deposits.
• Investments: stocks and shares, investment funds, bonds.
• Stocks and shares ISAs.
• Property (other than the family home in certain circumstances — see below).

The family home — when it IS included:

• If you enter care alone (not married or with no dependent remaining at home), the value of your home is included in the means test after a 12-week property disregard.

The family home — when it is NOT included:

• While a spouse or civil partner is living in the home.
• While a dependent child under 18 is living in the home.
• While a carer who has given up their own home to care for you is living in the home.
• During the first 12 weeks of a permanent care home placement (the 12-week disregard).

Not included:

• Personal pension funds that have not been drawn (uncrystallised pension pots). This is a critical and often overlooked point.
• Personal possessions.
• Funeral plans (pre-paid).

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The Deprivation of Assets Rule

The most important limitation on care cost planning is the "deprivation of assets" rule. If a local authority concludes that you have deliberately disposed of assets to reduce your capital below the means test threshold, it can treat you as if you still hold those assets. There is no statutory time limit.

The test: the local authority must conclude that avoiding care costs was a "significant purpose" of the asset disposal. They will consider:

• Whether you knew at the time of the transfer that you needed care or were likely to need it.
• Whether the transfer was part of a genuine and long-standing financial plan (e.g. gifts made regularly over many years as part of estate planning).
• Whether the timing of the transfer was suspiciously close to a care need arising.
• Whether any payment was made or received (a gift versus a sale at market value).

The practical implication: if you transfer assets to your children a few months before entering care, the local authority will almost certainly view this as deliberate deprivation and disregard the transfer. If you have been making regular annual gifts to children over 20 years as part of estate planning, the position is much more defensible — though not guaranteed.

The important distinction: the deprivation of assets rule applies to care cost funding. It operates separately from HMRC's rules on IHT gifts. A gift that is effective for IHT purposes (outside the estate after seven years) may still be treated as "notional capital" under the deprivation of assets rules for care cost purposes. The two regimes have different rules and timeframes.

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Legitimate Planning: The Pension

The most powerful and most legitimate care cost protection tool is the pension.

Uncrystallised pension funds (where the pension benefits have not yet been drawn) are excluded from the means test assessment. This means that money held within a SIPP, personal pension, or defined benefit scheme that has not been accessed is simply not counted by the local authority when assessing whether you need to fund your own care.

Practical implication: if you have £500,000 in pension savings and £500,000 in a general investment account, the local authority sees only the £500,000 in the general investment account. The pension does not count until you draw benefits from it.

Note: once you draw pension income, the accumulated pension in payment (the annuity income or drawdown income) is treated as income in the means test calculation, but the pension capital is no longer assessed separately (it has been converted to income). This makes the pension — particularly an undrawn SIPP — an important planning tool.

Further benefit: pension savings are also outside the estate for IHT purposes (until the expected April 2027 change, when unspent pension pots may be brought into the estate). The pension therefore provides both care cost protection and IHT efficiency simultaneously.

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Tenants in Common: Protecting the Half of the Family Home

Where a couple jointly owns the family home as "joint tenants," the entire property passes automatically to the surviving owner on the first death (right of survivorship). This means the full property eventually becomes part of the surviving partner's estate — and the full value is therefore assessable for care costs when the survivor enters care.

Converting to tenants in common: where the couple owns the property as "tenants in common," each partner owns a distinct share of the property (typically 50:50, though other splits are possible). On the death of the first partner, their 50% share does not pass automatically to the survivor — it passes in accordance with their will (or intestacy rules if no will exists).

If the first partner's will passes their 50% share to the children or into a discretionary trust (rather than to the surviving spouse), then:

• The deceased's 50% share is now owned by the children or trust.
• The surviving partner continues to live in the property.
• When the survivor eventually requires care, the means test can only assess the survivor's 50% share — not the children's or trust's 50% share.

The protection: the deceased partner's share of the family home is effectively ring-fenced. If the survivor enters care, only 50% of the property value (not 100%) is included in the means test.

Important qualifications:

• This planning must be in place before care need arises. The deprivation of assets rule applies if the conversion to tenants in common is done specifically in anticipation of care.
• The children must be genuine owners of their share — this is not a nominal arrangement.
• There are IHT implications of the share passing to children directly versus a trust.
• Independent legal advice is essential to ensure the trust or property arrangement is correctly structured.

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Discretionary Trusts and Property Trusts

Some advisers recommend placing the property into a discretionary trust during the lifetime of the owners. While there are circumstances where this is appropriate, it comes with significant complications:

• The transfer of the property into a discretionary trust is a chargeable lifetime transfer for IHT, not a potentially exempt transfer: an immediate 20% entry charge applies to any value above the available nil-rate band, and the transfer must survive seven years to fall fully outside the estate.
• Stamp Duty Land Tax (SDLT) may be payable on the transfer.
• Mortgaged properties cannot simply be transferred into trust without lender consent.
• The couple loses direct ownership of their home — the trust owns it.
• If the arrangement is structured specifically to avoid care costs and the local authority can demonstrate this, the deprivation of assets rule may still apply.

The legal costs and complexity of a property trust arrangement should be carefully weighed against the benefit. For some families it is appropriate; for others, the tenants-in-common strategy achieves most of the protection at a fraction of the cost.

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Genuine Long-Term Gifting

Gifts made as part of a genuine, long-standing pattern of wealth transfer — annual gifts within the IHT exemptions, regular gifts out of income, or gifts made decades before any care need — are much less likely to be treated as deprivation of assets than late-life transfers.

The combination approach: a family that has been making regular annual gifts to children for 15 years, has a pension pot, and owns property as tenants in common is in a much stronger position than one that takes no action until a care need is foreseeable.

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NHS Continuing Healthcare (CHC)

The most financially significant — and most overlooked — aspect of UK care planning is NHS Continuing Healthcare. If an individual's care needs are primarily health-related (as opposed to primarily social care or personal care needs), the NHS may fund the full cost of care, with no means test and no cost to the individual or family.

The key distinction: local authority-funded social care is means-tested. NHS Continuing Healthcare is not means-tested. If your care needs qualify for CHC, the NHS pays in full, regardless of your assets.

Who qualifies: CHC eligibility is determined by a multidisciplinary assessment using the NHS Decision Support Tool. It considers needs across multiple domains: behaviour, cognition, communication, psychological and emotional needs, mobility, nutrition, continence, skin integrity, breathing, and medication and symptom management. The key question is whether the nature, complexity, intensity, or unpredictability of health needs is such that a primary health need exists.

Conditions that may qualify: advanced dementia, Parkinson's disease in advanced stages, motor neurone disease, complex stroke sequelae, end-stage cancer, complex neurological conditions.

Requesting a CHC assessment: families are often not told about CHC eligibility. Anyone in a care home or receiving care at home with complex health needs should request a CHC assessment from the local NHS Integrated Care Board (ICB). GPs, hospital discharge teams, and care home managers can trigger an assessment.

If granted and then withdrawn: CHC funding can be removed if the care needs are reassessed as primarily social rather than health. A regular six-monthly review is standard; the decision can be appealed.

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This guide provides general information about care cost planning in England. Rules in Scotland, Wales, and Northern Ireland differ. The figures quoted — thresholds, care costs, and rates — are as at 2026 and should be verified with the relevant local authority. This guide does not constitute legal, financial, or medical advice. Care planning involves complex interactions between social care law, tax law, trust law, and property law — specialist independent advice is strongly recommended.

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How Global Investments can help

Global Investments supports HNW clients in planning for care costs as part of a comprehensive estate and later-life plan. We help clients understand the means test, assess the role of the pension in care cost protection, and coordinate property planning and gifting strategies within a broader estate plan — working alongside specialist solicitors and later-life advisers where required. If you have not considered how care costs might affect the estate you intend to leave, we would encourage you to discuss this with our team.