Gordon Brown acknowledged last week that millions of people fear having to sell their homes to pay nursing-home fees, when they would rather pass them on to family members.

The prime minister launched a six-month consultation into the growing long-term care-funding gap, which threatens to leave England alone with a £6billion shortfall within 20 years.

However, accountants claim that you could already avoid having to sell your home by setting up a basic trust commonly used for inheritance tax (IHT) planning.

Mike Warburton, tax partner at accountant Grant Thornton, said: “Traditionally, we have advised couples to enter into discretionary will trusts as part of their IHT planning. This is where half the house passes into trust for any children on the death of the first spouse. But I believe that the trusts could also mean that property could, in effect, be disregarded when local authorities assess how much your estate should pay towards long-term care.”

Under the English system, anyone with savings or capital of more than £22,250 is required to pay for his or her own care fees. If you have a property worth more than this, as most people do, it will be disregarded if it is inhabited by a partner, former partner or relative.

If you are the only person living there, the local authority may force you to sell it to pay for care. However, if it is jointly owned by a trust for your children, the council cannot make a claim against it. They may place a charge against the property so they get some of the proceeds when it is eventually sold, but even then the local authority can only get its hands on half.

And if your family doesn't want to sell and the local authority is still pursuing a claim, their own guidelines state that the value of a half-share of a property is in effect nil.

Forecasts show that a quarter of Britain's population will be 65 or older within two decades, while the number of people over the age of 85 is expected to have doubled in the same timeframe.

Owain Wright, head of long-term care funding at over-fifties finance specialist Saga, said: “Our research shows that the future average cost of a four-year stay in a care home is set to double from £112,312 to £223,476 in the next 20 years.”

Here we look at the options.

Discretionary will trusts

Discretionary will trusts have traditionally been used to transfer a half share of a jointly owned property to any heirs on the death of the first partner, thereby using up both inheritance-tax allowances, now £312,000.

Since the budget, this is no longer so important because you can now transfer your allowance to your spouse on death. However, these tax-planning devices could provide a relatively simple way to reduce the value of your home as seen by care authorities and make it much harder for them to insist on its sale.

Suppose a couple haven't done any trust planning, the husband dies and his half of the property passes to the wife. She needs to go into a nursing home, at which point the local authority could, in some circumstances, force the sale of the house. In other cases, the payment of care fees could be deferred until she died and the property was sold.

If, however, the property had passed into trust, the property could not be sold while the spouse was still alive, and would be equally difficult to sell on death unless the children agreed.

The Department of Health said: “Where a resident is a joint beneficial owner of a property it is the resident's interest in the property which is to be valued as capital, not the property itself.”

Equity release

According to figures from equity release provider Home & Capital, 78% of the combined wealth of homeowners over the age of 65 is tied up in their homes.

It claims that equity release therefore offers a means for older homeowners to afford the care they need, without giving up their flats or houses.

However, advisers point out that downsizing is a much cheaper option if you can bear to part with your home.

Danny Cox of Hargreaves Lansdown, an adviser, said: “I would advise clients to treat equity release as a last resort as having a debt of this kind against your property reduces your flexibility and eats into your heirs' inheritance. If you do decide to go for this option, choose a drawdown scheme that gives you a monthly income as this involves paying less interest.”

Suppose a woman aged 70 has a £400,000 house. Under the Norwich Union drawdown scheme, she could borrow a maximum of £124,000. Of that, £31,000 would be drawn immediately and a further £93,000 could be drawn subject to a minimum of £5,000 per tranche. Interest would be charged at 6.69% and is charged only on the amount advanced.

Long-term care insurance

Long-term care cover offers a way of insuring yourself against future care costs. However, it is only offered by a very limited number of providers and can be very expensive as a result.

Cox said: “We generally find that those who can afford the premiums do not actually need the cover, while those who do need it do not have enough spare cash to pay for it.”

Partnership Assurance Premier Cover would charge a 70-year-old woman £220 a month for a policy that would pay a £1,000 a month benefit to cover care costs.

Long-term care annuities

If you already require care when you come to take out an annuity, you can apply for a specialist long-term care option.

These work like other types of impaired-life annuities in that the income you receive is higher.

Cox said: “Somebody who is very severely disabled will receive a much higher rate of income than someone with a slight disability - a 20% to 30% uplift on standard rates is not unusual. This option is only available to those who require immediate care.”

Companies that offer annuities of this kind include Axa PPP and GE Life.

The shocking statistics

The long-term-care funding gap in England alone is expected to hit £6 billion by 2028.

Saga says the average cost of a four-year stay in a care home will double to £223,476 in the next 20 years.

More than 60% of working adults have no financial retirement plans in place, according to Norwich Union.

Six in 10 over-50s fear their pensions and savings are unlikely to see them through retirement.

Home Capital says that among homeowners over 65, 78% of their wealth is tied up in property.