According to the Office for National Statistics (ONS), more than half (56.4%) of care home residents aged 65 and over are aged 85 and above, while almost three-quarters (74.0%) are aged 80 and over. In 2021, 10.8% of all people aged 85 and over in England and Wales were living in a care home, highlighting the growing likelihood that advanced age may be accompanied by a need for formal care support.
For many families, one of the greatest uncertainties is not whether care may be needed, but for how long. Research undertaken by the Personal Social Services Research Unit (PSSRU) found that the average stay in a care home is approximately 2.3 years, although experiences vary significantly. Around 27% of residents remained in care for more than three years, and a small proportion stayed considerably longer, demonstrating why planning based solely on average outcomes can underestimate potential costs and funding needs.
Few financial decisions feel as personal as paying for care. Families often want to ensure a loved one receives the right level of care and support while protecting the wealth they have built. The challenge is that the wrong planning, however well intended, can reduce choice, create financial or legal problems, or be challenged later by a local authority. Importantly, care fee planning should not be based on isolated actions, such as transferring property ownership, making gifts or buying a particular product. It requires a joined-up view of affordability, family objectives, tax, legal arrangements and future care needs.
In England, income, savings, investments and, in some cases, the value of the home may be assessed when determining how much someone should contribute towards care. For 2026/27, individuals with capital above £23,250 are generally expected to meet the full cost of care, subject to detailed rules.
The home, often one of the most valuable assets in the estate, may be disregarded in certain circumstances, for example where the individual continues to live there or where a qualifying dependent, such as a spouse, remains in the property. This means the family home may not always need specific planning to be preserved, although care decisions are typically driven by need and affordability, rather than asset protection.
When assessing how care fees will be funded, it is important to understand that not all income and assets are treated in the same way. For example, where one member of a couple enters care, part of certain private pension income may be allocated to the spouse remaining at home and disregarded. Some investment bonds may also be treated differently from directly held assets, although this depends on the facts, the product structure and how withdrawals are taken, making advice particularly important.
Asset protection trusts are often marketed as a way to protect the family home from care fees. While trusts can have a legitimate estate planning role, they can create significant risks if avoiding care fees is a motive or care is already foreseeable. In those circumstances, a local authority may challenge the arrangement as deliberate deprivation of assets and still treat the person as owning the asset for means-testing purposes.
Trusts can also create tax, legal and practical issues, including inheritance tax, capital gains tax, loss of control, trustee obligations and family disputes, so caution and advice is needed to ensure this is the right solution, particularly as settling assets into trust is often an irrevocable decision.
These risks are not limited to formal trust arrangements. The same principles can apply to any step that reduces the assets available for a care fees assessment, where avoiding care costs is a significant motive. As above, this is known as deliberate deprivation of assets and may include:
Care fee planning should not focus only on in-life planning. Reviewing Wills and wider estate planning is also important, particularly for couples who own assets jointly or want to provide for a surviving spouse or civil partner.
A simple Will leaving everything outright to the survivor may be appropriate, but it can also mean the survivor later owns all family wealth in their own name, potentially bringing it into their means test. In some circumstances, specific Trusts written into a Will could be considered, potentially providing an opportunity for the survivor to benefit during their lifetime while preserving the underlying capital for children or other beneficiaries. This must be carefully drafted by a suitably qualified solicitor and coordinated with the couple’s wider financial, property, tax and care funding position.
Where an individual has surplus capital and income, and can evidence that care costs can be met sustainably for life, gifting may form part of wider financial and estate planning. However, affordability should be tested carefully, including longevity, inflation, investment risk and the possibility that care needs may change.
Where gifts are being considered, it’s important to note that a local authority is not time-limited when assessing whether an individual may have deliberately deprived themselves of assets. As part of their review, they will consider the circumstances at the time of the gift, including whether care was needed or foreseeable and whether avoiding care fees was a significant motive. Gifts made later in life, when health is declining or care is already being received, are therefore more likely to be challenged.
Particular caution should be exercised where gifts are made under a Power of Attorney, as attorneys have limited gifting powers and may require Court of Protection approval.
There is also a wider issue of control: once assets are given away, they are no longer available to meet future needs and also exposed to other risks in the hands of the recipients (i.e. divorce risk). For some families, retaining assets, ring-fencing funds or considering care funding solutions such as annuities may provide greater flexibility and certainty.
That said, the need to pay for care, or the concern that care may be required in the future should not mean that gifting and estate planning should be disregarded, as in many cases suitable planning can be considered - long-established patterns of gifting, support for family members, or tax planning undertaken well in advance of any anticipated care needs are more likely to be viewed as reasonable. It is the large or atypical transfers made in response to declining health or increasing care costs which are likely to be subject to greater scrutiny.
For some individuals, an immediate needs care annuity can form part of a practical solution.
A care annuity is designed to provide a guaranteed income for life, typically paid directly to a registered care provider, in exchange for a lump sum. As a result, it can help create certainty that care fees will be met (with the option that there can also be some protection against the impact of rising costs), reducing the risk that assets are fully deleted and family members face uncertainty about future funding.
This can also support inheritance planning. By using part of the estate to secure care costs for life, other assets may be more clearly identified as potentially available for gifting or other IHT planning, subject to future needs, tax and investment risks.
Care annuities will not be appropriate for everyone. Factors such as age, health, life expectancy, care costs, inflation protection, available capital and family objectives all need to be assessed. However, they can be valuable where the priority is to ensure care is funded while providing clarity over what assets may remain
Care fee planning is rarely straightforward. The right approach depends on personal circumstances, family objectives, health, available assets and how those assets are structured. It is not about hiding assets, but making informed, evidence-based decisions that protect choice, preserve dignity and give families confidence about the future. If you are considering gifting, trusts, care annuities or wider estate planning, advice from a specialist later-life financial adviser can help avoid unintended consequences and build a plan that remains robust if care needs change.
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