Trusts and care fees:
separating the myth from the rule

How local authority care fee means tests work

When someone in England needs residential care and cannot fund it entirely themselves, the local authority carries out a financial assessment - a means test. This assessment looks at both income and capital to determine how much the individual must contribute towards their care costs.

Capital includes savings, investments, and - crucially - property. If the value of your assets exceeds the upper capital threshold, you are expected to fund your own care entirely. Below the lower threshold, the local authority funds your care in full. Between the two thresholds, you make a contribution calculated on a sliding scale.

The deliberate deprivation rule

Local authorities have significant powers to look back at transfers of assets made before a care needs assessment. If a transfer was made with the intention - even in part - of reducing assets to avoid care fees, the local authority can treat the transferred asset as if it were still owned by the individual. This is known as deliberate deprivation.

This is the central point that some care fee planning schemes fail to address honestly. They focus on the mechanics of the transfer while glossing over the question of intent. If you transfer your property into a trust primarily to protect it from care fees, the local authority is entitled to disregard the transfer entirely - and charge you as if you still owned the asset.

What Property Protection Trusts genuinely do

A Property Protection Trust - sometimes called a Will Trust or a Home Protection Trust - is written into your Will and comes into effect on death. Its primary legitimate purpose is not care fee avoidance. It is something quite different: protecting your share of the family home for your children in the event that the surviving spouse requires care, remarries, or makes a new Will.

In this context, it works as follows. When the first spouse dies, their share of the property passes into a trust rather than outright to the survivor. The surviving spouse retains the right to live in the property for life. When they die or move into care, the trust assets - the deceased spouse's share - pass to the children, protected from the surviving spouse's circumstances.

The key point is that only the deceased spouse's share is protected. The surviving spouse's own share of the property remains their asset and is fully assessable in a care means test.

The legitimate half-and-half scenario

This structure produces a genuinely legitimate outcome in one specific and important scenario: where one spouse dies, the other eventually requires care, and the local authority assesses the surviving spouse's assets.

Because only the surviving spouse's share of the property is theirs, and the deceased spouse's share is held in trust for the children, the assessable asset is reduced. The local authority can only count what belongs to the person being assessed. This is not avoidance - it is the correct legal position. The deceased spouse's share was never the survivor's to begin with.

This is the genuine, legitimate protection that a well-structured Property Protection Trust offers. It is meaningful. It is real. And it is entirely different from the promise of wholesale care fee avoidance that some schemes imply.

The risks of lifetime property transfers

Some schemes go further, suggesting that you transfer your property into a trust - or to your children - during your lifetime, rather than through your Will. These arrangements carry substantially greater risk.

• Deliberate deprivation. If the local authority concludes that avoiding care fees was a motivation, the transfer can be set aside entirely.
• Loss of control. Once you transfer a property to your children, you no longer own it. If a child divorces, becomes bankrupt, or predeceases you, the property may not be protected in the way you intended.
• Capital gains tax. Transferring a property that is not your main residence can trigger a capital gains tax charge at the point of transfer.
• Stamp duty land tax. If there is a mortgage on the property, a transfer may trigger SDLT liability.
• Loss of the main residence nil-rate band. Transferring your home away can affect your entitlement to the residence nil-rate band for inheritance tax purposes.

What honest, legitimate planning looks like

No legitimate planning can guarantee that your home will be entirely protected from care fees in all circumstances. Anyone who tells you otherwise is either mistaken or not being straight with you.

What good planning can do is ensure that your estate is structured correctly for the purposes it genuinely serves - protecting your spouse, protecting your children's inheritance, ensuring that only the right assets are assessable in the right circumstances. A Life Interest Trust written into a Will achieves real and legitimate protection. It should be explained honestly, for what it does - not oversold as something it cannot guarantee.

The starting point for any family thinking about care costs and estate planning is a clear-eyed review of their actual position: what they own, how they own it, what is genuinely assessable, and what legitimate structures might apply. That review should be carried out by someone who is willing to tell you the truth, not someone whose business depends on making the promise sound better than the law allows.