Legal News | 23.10.25

Proceed with caution: care home fees, property and trusts

The average cost of care home fees currently stands at between £1,298 per week for residential self-care and £1,564 per week for dementia care[i].  If an individual has assets above a certain level (£23,250 for the 2025-2026 tax year), they are usually required to pay these costs themselves.   As the population gets older, and the requirement for care grows, the cost of funding care fees is increasingly a concern for our ageing and elderly clients (and their families).

Where a financial assessment is carried out, usually by a local authority, assets and property are taken into account.  In order to reduce their financial assets so that the local authority funds more of their care costs, clients often look to gift property or put assets in trust for family members.  But does this work and what needs to be considered?

Gifting a property to a family member

If there is no charge or mortgage on a property, in theory you are free to gift it or other assets you own as you please.  You should however consider the following:

• if you have given away your home, this could be seen as a ‘deliberate deprivation of assets’ (i.e. intentionally gifting money and assets to reduce the value of your estate) and the full value of your home could be taken into account in a financial assessment regardless of the gift;
• the 7-year rule that applies to gifts for Inheritance Tax purposes does not apply if a deliberate deprivation of assets ruling is made. This common misconception means there is no time frame that limits a council’s ability to look back and assess your financial standing, including any property or assets you had previously given away.

There are other risks too:

• gifting money or assets means you no longer own these and cannot ask for them back;
• reducing your assets could leave you financially vulnerable and you may find yourself in a less financially stable place or with less control or choice later on in life;
• if you gift your property with a view to renting it from the new owner, rent must be paid at full market value to avoid adverse inheritance tax consequences;
• relationships can change – you may gift your property to a family member on the proviso that you can continue to live there but if that relationship breaks down and the house is sold you may find yourself without a home; and
• you may also be liable for Capital Gains Tax if you transferred the property at a gain.

Transferring the property into a trust         

An “Asset Protection Trust” is often sold as a way to reduce inheritance tax or mitigate care home fees.  Trusts such as these are legal structures that are designed to separate the ownership of your assets and potentially safeguard assets from creditors, legal judgments or the value of your overall estate.  However, a decision to place any assets in trust (particularly your home) should never be taken without professional advice and a full understanding of the implications.

Many of the risks highlighted above could render such planning ineffective and you may end up in a worse position, both in terms of your security to remain in your own home and the severity of the tax implications (for you personally but also for the Trust which may be subject to its own tax charges). You may therefore end up paying professional fees to establish a trust and possibly then again to unwind it if mistakes have been made.

We would strongly advise that you take legal advice and move with caution if you are considering gifting assets or putting them in trust to minimise your exposure to care home fees.  If you would like to speak to a member of the Private Client team at Wansbroughs in relation to this, please contact us on wealth@wansbroughs.com

[i] 9 Sept 2025 – carehome.co.uk data survey