Technical Note: Can UK Care Home Fees Legally Be Avoided by Using a Trust?

The idea that care home fees can be “avoided” by placing assets into a trust is common in marketing literature. The legal position under the Care Act 2014, the Charging and Assessment of Resources Regulations 2014, and the Care and Support Statutory Guidance (CASSG) is far more nuanced.

Trusts do not automatically remove assets from financial assessment. Whether assets are included depends primarily on the statutory rules on deprivation of assets and the concept of notional capital (treated‑as‑owned capital).

Understanding this distinction is essential.

1. How Care Home Fees Are Assessed in England

Local authorities assess a person’s ability to contribute to care costs under:

• Care Act 2014, ss.14–17

• Care and Support (Charging and Assessment of Resources) Regulations 2014

• CASSG, especially Annex B (Capital) and Annex E (Deprivation)

Broadly:

• If capital exceeds the upper threshold, the person must self‑fund.

• If capital is below the threshold, local authority support may be available.

“Capital” includes:

• Cash and investments

• Property (subject to disregards)

• Other financial resources

Crucially:

The assessment is not limited to assets still legally owned by the individual.

2. What Is “Deliberate Deprivation of Assets”?

Under CASSG Annex E, a local authority may treat a person as still owning assets they have given away if:

1. Avoiding care charges was a significant motive for the transfer (Annex E, para 6), and

2. The need for care was reasonably foreseeable at the time (Annex E, paras 7–11).

There is no fixed look‑back period. The question is one of intention and foreseeability, not timing alone.

If deprivation is found, the authority applies:

• Notional capital (Regulation 22), or

• Notional income (Regulation 23)

This is the statutory basis for “treating the person as still owning it.”

3. Does Placing Assets Into a Trust Work?

It depends entirely on the circumstances.

Scenario A: Trust Created Late in Life, Care Foreseeable

If a person in declining health transfers their home or savings into a trust shortly before entering care—or at a point when care needs were reasonably foreseeable—the local authority is likely to find deliberate deprivation.

Consequences:

• The person is assessed as if they still own the assets (notional capital).

• The trust remains legally valid, but ignored for means‑testing.

• The intended care‑fee mitigation fails.

This is the most common real‑world outcome.

Scenario B: Trust Created Long Before Care Was Contemplated

If a trust was established many years earlier as part of broader estate planning, and there was no foreseeable care need, the analysis becomes more nuanced.

Local authorities must consider:

• The person’s age and health at the time

• The stated purpose of the trust

• The surrounding circumstances

• Whether care was reasonably foreseeable

Even then, the outcome is fact‑specific.

The mere existence of a trust does not create immunity from assessment.

4. The Special Case of the Family Home

Many commercial schemes focus on transferring the family home into a trust.

Two key issues arise:

A. For care assessment

Continued occupation does not prevent a deprivation finding. Local authorities look at substance over form (CASSG Annex E, para 12).

B. For inheritance tax

If the settlor continues to occupy the property, the Gifts With Reservation of Benefit (GWR) rules apply (IHTA 1984 ss.102–102C).

This means:

• The home remains in the settlor’s estate for IHT

• The trust may fail for both care‑fee and IHT purposes

5. What Trusts Can and Cannot Do

Trusts can:

• Change legal ownership

• Create succession structures

• Define beneficial interests

Trusts cannot:

• Override statutory means‑testing rules

• Prevent a local authority applying deprivation rules

• Guarantee exclusion from assessment

The law is not hostile to trusts. It is hostile to transfers made primarily to avoid statutory obligations.

6. Timing and Motivation Are Central

Two factors dominate:

1. Foreseeability — was care reasonably foreseeable at the time?

2. Purpose — was avoiding charges a significant motive?

A transfer made at age 50 as part of general estate planning is treated differently from a transfer made at age 82 following a diagnosis.

There is no universal safe harbour.

7. A Note on Marketing Claims

Some commercial products are marketed as:

• “Care fee protection trusts”

• “Asset protection trusts”

• “Family home protection trusts”

While the use of the word “protection” is often warranted (though this is not always the case) such terminology should always be treated with care. Clients always need to get their estate planner, solicitor, financial adviser or whatever other person they are using to set up their trust, to tell them exactly and in clear terms what the “protection” is protecting them from?

Something which is said to protect must necessarily protect from something, and if that something is care fees then this should be clearly communicated and an explanation given of how it works because the actual legal position is:

• Trusts are not automatically effective for care‑fee mitigation

• Local authorities have statutory powers to assess deprivation

• Outcomes depend on timing, intention, and evidence

Any suggestion of guaranteed avoidance should be treated with caution.

8. Conclusion

UK care home fees cannot be legally “avoided” simply by placing assets into a trust.

In some circumstances, a long‑standing and properly structured trust may not be treated as deliberate deprivation. In others—particularly where care needs were foreseeable—transferred assets may still be treated as belonging to the individual for assessment purposes.

Trusts are structural tools. They are not exemptions from statutory frameworks.

As with inheritance tax, substance prevails over form.

This article is provided for general informational purposes only and does not constitute legal or tax advice.

References & Authorities Cited

Primary Legislation

• Care Act 2014, ss.14–17

• Care and Support (Charging and Assessment of Resources) Regulations 2014, regs. 22–23

• Inheritance Tax Act 1984, ss.102–102C (Gifts With Reservation)

Statutory Guidance

• Care and Support Statutory Guidance (CASSG):

  • Annex B (Capital)

  • Annex E (Deprivation of Assets)

HMRC Manuals (for GWR/IHT context)

• HMRC IHTM 14301+ (Gifts With Reservation)

• HMRC IHTM 04000+ (Transfers of Value)