Protecting your home and savings
Two things take most of what families lose: care fees and inheritance tax. Here is what genuinely protects against each, and the schemes that quietly make things worse.
The short answer
- In England, if your assessable capital is above £23,250 you normally pay your care fees in full. Below £14,250 your capital is ignored, though your income is still assessed.
- Your home is disregarded while a spouse, partner or certain relatives still live in it.
- The most effective legitimate protection is a property protection trust in a couple's wills, which ring-fences the first partner's share — usually about half the home.
- Giving assets away to avoid care fees can be reversed under the deliberate deprivation of assets rules. There is no time limit, and the "seven-year rule" does not apply here — that is an inheritance tax rule.
- For tax, the biggest wins are usually free: wills written so the £175,000 residence allowance applies, and claiming the transferable allowances.
What's on this page
What you are actually protecting against#
Two very different risks, often confused, with different rules and different answers.
| Care fees | Inheritance tax | |
|---|---|---|
| Who decides | Your local council, under the Care Act 2014 | HMRC |
| When | While you are alive | After you die |
| Trigger | Assessable capital over £23,250 | Estate over the available allowances |
| Cost | Potentially unlimited, until capital falls | 40% of the excess |
| Time limit on challenge | None | 7 years years for most gifts |
That last row is the one that catches people. A gift made eight years ago is outside your estate for inheritance tax but can still be examined by a council assessing care fees.
How the care means test works in England#
When you need residential care, the council assesses your capital — savings, investments, second properties, and sometimes your home.
- Above £23,250: you are a self-funder and pay the full cost.
- Between £14,250 and £23,250: the council contributes, but assumes you generate £1 a week of "tariff income" for every £250 of capital in that band.
- Below £14,250: your capital is ignored entirely. Your income — pensions, most benefits — is still taken into account.
When your home is ignored#
Your home is disregarded from the capital assessment while any of these people still live there:
- your husband, wife, civil partner or unmarried partner;
- a relative aged 60 or over, or one who is incapacitated;
- a child of yours under 18;
- in some cases, an estranged or divorced former partner who is a lone parent.
It is also disregarded for the first 12 weeks of a permanent care placement, and a deferred payment agreement can let the council take a charge on the property so the bill is settled from the eventual sale rather than a forced sale now. Full guide to care fees and the means test.
What legitimately protects your home#
A property protection trust in your wills — the main one#
A couple who own their home as tenants in common can each leave their 50% share into a trust rather than to the survivor. The survivor keeps the right to live there for life. The half in trust is not theirs, so when the survivor is assessed for care, only their own half is counted.
On a £400,000 home, that is roughly £200,000 kept for the children rather than spent on fees. It works because the protection is triggered by a death — nobody has deprived themselves of anything. How to set one up.
This only works if you own the property as tenants in common, not joint tenants. As joint tenants the whole house passes automatically to the survivor and there is no share to put into trust. You can check the tenancy at the Land Registry, and change it by severing the joint tenancy — a straightforward, inexpensive step. It is the single most valuable ten-minute check on this site.
Owning the right way and writing the wills right#
The order is: sever the joint tenancy → write wills containing the trust → keep the wills current. All three or none of it works.
What does not work — and can backfire#
If a council decides you disposed of an asset to reduce a care charge, it can carry out a "notional capital" assessment — treating you as still owning what you gave away. It can also, in some circumstances, recover the money from the person who received it. There is no time limit. The questions asked are: did you know care was a realistic prospect at the time, and was avoiding the charge a significant reason for the transfer?
Things that regularly fail:
- Transferring the house to the children while you carry on living in it. Fails the care test, fails the inheritance tax test (gift with reservation of benefit), exposes the property to your children's divorces, bankruptcies and creditors, and can create a capital gains tax bill they would not otherwise have had.
- Spending capital down deliberately on unusual purchases just before an assessment.
- Off-the-shelf "asset protection trusts" sold at seminars or on the doorstep, usually costing thousands, frequently ineffective for the purpose sold, and sometimes actively harmful. If someone guarantees your home is "safe from the council", that is the moment to leave.
Protecting against inheritance tax#
The unglamorous options work best, and several are free:
- Make sure your wills let the £175,000 residence nil-rate band apply — the home has to pass to direct descendants.
- Make sure the surviving partner's executors will claim the transferred allowances. A couple can reach £1,000,000.
- Use the £3,000 annual gift exemption each year, and gifts out of surplus income.
- If you are leaving anything to charity, leaving 10% of the net estate cuts the rate on the rest from 40% to 36%.
- Write life policies in trust so they pay out outside the estate.
See how to reduce inheritance tax for the full list.
The order to do things in#
Sequence matters more than people expect, because several of these steps depend on earlier ones having been done properly:
- Check how you own your home. Joint tenants or tenants in common. Everything in the care-fee plan hangs on this one fact, and it takes minutes to establish.
- Sever the joint tenancy if you need to, before anything else.
- Write or rewrite the wills, including the trust if you want one.
- Put lasting powers of attorney in place, so someone can actually act when it matters.
- Work out whether you have an inheritance tax problem before spending money solving one.
- Start using the annual gifting allowances, if you have surplus.
- Take advice on anything involving a business, a farm, foreign property or an estate near the £2,000,000 taper.
Putting it in order#
If you only do one thing after reading this, read the six-step guide — it puts all of this in the order it actually needs doing, from writing a will to getting advice.
→ How to keep the lot, in six steps
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Frequently asked questions
Will I definitely have to sell my house to pay for care?
Not necessarily. It is disregarded entirely while a partner or certain relatives still live there, ignored for the first 12 weeks of a permanent placement, and a deferred payment agreement lets the council secure the fees against the property so it is sold later rather than now. A forced immediate sale is far from automatic.
Does the seven-year rule protect gifts from care fees?
No, and this is the most damaging myth in this area. The 7 years-year rule is an inheritance tax rule. Councils assessing care charges apply the deliberate deprivation of assets rules, which have no time limit at all. A gift made a decade ago can still be examined if the circumstances suggest care costs were a significant motivation.
Can I put my home into a trust while I am alive to protect it?
You can, but think hard first. If you are healthy and there is no realistic prospect of care, the deprivation argument is weaker — but the tax consequences are real: the transfer can be a chargeable lifetime transfer, you lose the capital gains uplift on death, and continuing to live there rent-free means the property stays in your estate for inheritance tax anyway. For most families the will-based property protection trust achieves more, costs less and carries far less risk.
What if only one of us needs care?
While one partner remains living in the home, the property is disregarded from the other's assessment. The problem arrives on the second event — which is exactly why the property protection trust, triggered by the first death, is the standard answer.
Do these thresholds apply across the UK?
No. The £23,250 and £14,250 limits are England's. Scotland, Wales and Northern Ireland set their own, and Scotland has free personal and nursing care contributions. Everything on this site covers England & Wales, and the care means-test figures are England's.
This is general information, not legal advice. Everyone's situation is different — speak to a qualified adviser before acting. KeepTheLot is an independent information service covering England & Wales. We are not a law firm.