Understanding the 7-Year Rule and Care Home Fees: What You Need to Know
Discover the truth about the 7-year rule for care home fees. Learn how financial assessments work and avoid common misconceptions. Read more now!
Have You Heard About the 7-Year Rule for Care Home Fees? Here’s the Truth
Many people believe that transferring assets to family members at least seven years before needing care will protect those assets from financial assessments for care home fees. This is a widely held belief, but unfortunately, it is not accurate.
The 7-year rule is actually part of inheritance tax laws and does not apply in the same way to care home fees. Misunderstanding this can lead to financial complications for individuals and their families. This blog will clarify the facts and help you understand how care home fees are assessed so you can plan effectively for the future.
What Is the 7-Year Rule?
The 7-year rule is a provision in UK inheritance tax laws. It states that gifts made more than seven years before death are usually exempt from inheritance tax. However, this rule does not apply when local authorities assess financial eligibility for care home fees.
Some assume that giving away property or savings at least seven years before needing care means these assets will no longer be considered in a financial assessment. This is incorrect. Local authorities apply different rules when evaluating whether assets have been transferred to avoid care costs, and there is no definitive seven-year cut-off point in these assessments.
How Local Authorities Assess Care Home Fees
When someone applies for financial support with care home costs, the local authority conducts a means test. This assessment considers both income and capital, including property and savings. The financial thresholds differ across the UK:
| Country | Upper Threshold | Lower Threshold |
| England | £23,250 | £14,250 |
| Scotland | £35,000 | £21,500 |
| Wales | £50,000 | N/A |
| Northern Ireland | £23,250 | £14,250 |
If assets exceed the upper threshold, the individual must pay for their own care. Those with assets below the lower threshold may qualify for full financial support, while partial assistance is available for those whose assets fall between the two figures.
What Counts as Deliberate Deprivation of Assets?
Local authorities have the power to investigate whether assets were given away with the intention of reducing care costs. If they decide that assets were transferred deliberately for this reason, they may classify it as deliberate deprivation and still include the value of the assets in financial assessments. Examples of actions that could be considered deliberate deprivation include:
- Gifting large sums of money shortly before requiring care.
- Transferring property to family members while anticipating care needs.
- Selling a home for significantly less than its market value.
- Converting savings into assets that are harder to assess, such as jewellery or non-assessable investments.
If the local authority determines that a person has deliberately deprived themselves of assets, they may still count those assets as ‘notional capital’—meaning the individual may still be expected to contribute towards care home fees.
How Far Back Can Local Authorities Check?
Unlike inheritance tax laws, there is no fixed time limit for how far back a council can investigate asset transfers. Some believe that transactions over seven years old are exempt, but this is not the case. If the local authority believes that a transfer was made with the intention of avoiding care fees, they can review the transaction regardless of when it occurred.
Each case is assessed individually. If care was a foreseeable need at the time of the transfer, the local authority may still consider the asset as part of the person’s financial resources.
Understanding Property Transfers and Care Home Fees
Property is often the most valuable asset that individuals own, making it a key consideration when planning for care costs. Certain property transfers may raise concerns during financial assessments, such as:
- Adding a child’s name to the property title – If done close to the time care is needed, this could be scrutinised.
- Gifting a home but continuing to live in it – If no rent is paid, the property may still be considered part of the estate.
- Selling a property below market value – The local authority may investigate and challenge transactions that undervalue assets.
Seeking legal advice before making any property transfers can help avoid financial complications in the future.
Safe Ways to Plan for Care Costs
While giving away assets solely to avoid care fees can have financial consequences, there are legitimate ways to prepare for future care expenses. Strategies include:
- Gifting within reasonable limits – Small, regular gifts, such as birthday or holiday presents, are less likely to be challenged.
- Paying off debts – Settling outstanding financial obligations is generally not considered deprivation.
- Making charitable donations – Contributions to registered charities are typically exempt from financial assessments.
- Exploring care funding products – Financial solutions, such as immediate needs annuities, can help cover care costs.
- Considering equity release or rental income – Property-based solutions can provide financial support while retaining ownership.
- Looking into deferred payment schemes – Some local authorities offer options that allow care costs to be covered while securing assets.
Getting the Right Advice
Planning for care home fees can be complex, and seeking professional guidance is the best way to ensure financial security while complying with legal regulations. Experts who can help include:
- Solicitors – Advising on property transfers, wills, and trusts.
- Financial planners – Providing guidance on savings, investments, and tax planning.
- Care funding specialists – Assisting with local authority assessments and exploring NHS Continuing Healthcare options.
Support for Families in Yeovil, Sherborne & Bridport
At Home Instead Yeovil, Sherborne & Bridport, we understand that planning for care costs can feel overwhelming. Families want to ensure their loved ones receive high-quality support without unnecessary financial stress. While we do not provide legal or financial advice, we can connect you with professionals who specialise in care funding and financial planning.
Our team is here to offer compassionate, expert guidance on home care options, helping you make informed choices about the best care for your loved one. If you have questions about planning for care, reach out to us today—we’re here to help you navigate the journey with confidence and peace of mind.
Areas We Serve
Yeovil, Bridport, Sherborne, Crewkerne, Weston, Martock, Somerton, Langport, Eastfield, Castle Cary, Bruton, South Petherton, Beaminster, Milborne Port and surrounding areas.
DT6 3, TA18 7, TA12 6, BA22 9, TA14 6, DT6 6, TA11 7, TA11 6, BA21 3, DT9 6, DT6 5, TA10 0, BA22 8, BA7 7, DT9 5, DT6 4, DT2 0, BA21 4, TA17 8, DT8 3, BA22 7, TA10 9, TA13 5, BA10 0, BA9 8, TA15 6, DT9 3, BA20 2, BA21 5, BA20 1, TA16 5, DT9 4, TA18 8
Office Address: Somerset Yeovil Innovation Centre, Barracks Close,
Copse Road, Yeovil,
Somerset – BA22 8RN
Phone: 01935 577030