As the cost of long term care continues to rise, many individuals and families are faced with the daunting prospect of funding residential or nursing home fees. In some cases, this leads to attempts to reduce personal liability by deliberately giving away money, property, or other assets, a practice known as deprivation of assets.
In this article, we’ll explain what deprivation of assets means, which assets are considered in financial assessments, which are not, and other key information you need to be aware of.
What is Deprivation of Assets?
Deprivation of assets is when someone intentionally reduces their wealth, such as by giving away money, property, or other valuables, to avoid using those assets to pay for care home fees.
When applying for local authority funding for care, a financial means assessment is carried out to determine how much an individual can afford to contribute. This assessment takes into account income, savings, investments, and property (unless specifically excluded). If you have intentionally reduced your overall assets in order to qualify for funding this will be classed as deprivation of assets.
Understanding what qualifies as deprivation, and the serious consequences it can carry, is essential when planning for future care needs.
What assets are taken into account?
When applying for local authority funding for care, a financial assessment will determine how much you are expected to contribute toward the cost. This means the test considers a wide range of assets, both in the UK and abroad. The following are typically taken into account during the assessment:
- Income including pensions and some benefits
- Savings
- Investments
- Property (unless disregarded)
- Land
- Foreign assets
- Stocks and shares
- Premium bonds
What counts as deprivation of assets?
The Local Authority will look at any transaction that they feel could be a deliberate deprivation which could include the following:
- A lump-sum payment to someone else, such as a gift
- Substantial expenditure incurred suddenly and out of character with previous spending
- The title deeds of a property transferred to someone else
- Assets put into a trust that cannot be revoked
- Assets converted into another form that are disregarded in the financial assessment, for example, personal possessions
- Assets reduced by living extravagantly, for example, gambling
- Assets used to purchase an investment bond with life insurance – see about timing and expectation above.
What doesn’t count as deprivation of assets?
There are sometimes legitimate reasons for asset distribution that are unlikely to be considered as an attempt to avoid care costs including:
- Consistent charitable giving
- Customary gifts
- Long term financial planning
The key is ensuring that you seek advice as early as possible to ensure that you are aware of all the financial options available to you and at a time when they are more likely to be successful.
How does the Local Authority decide if deliberate deprivation has occurred?
The local Authority will look at motivation, timing and expectation. For example:
- Whether avoiding the care and support charge was a significant motivation or if there were other motivations
- The timing of the disposal of the asset. At the point the capital was disposed of, could the person have a reasonable expectation of the need for care and support?
- Did the person have a reasonable expectation of needing to contribute to the cost of their care?
The Local Authority can scrutinise any transaction they believe may have been a deliberate deprivation. Although many people believe that there is a time limit of seven this is not the case and in fact there is no time limit as to how far back they can look.
If the Local Authority finds that deliberate deprivation has occurred, they have a range of powers to ensure that they can access your assets as if the deprivation had not occurred. These include recovering the charges from the person who is now in possession of the asset or transferring property back into your name. They can also start County Court proceedings against you to recover debts if you do not pay, or if you have misrepresented information to them about your financial position.
Planning ahead for care costs
The key is ensuring that you seek advice as early as possible to ensure that you are aware of all the financial options available to you and at a time when they are more likely to be successful. The Society of Later Life Advisers (SOLLA) have accredited financial advisors who specialise in financial products such as care annuities and insurance.
It is never too early to review your circumstances so for clear, friendly advice on all aspects of estate and care fee planning.
How can Goughs help?
Planning for future care costs can be complex, especially when it comes to managing your assets responsibly. Understanding the risks of deprivation of assets is essential to avoid unintended consequences and ensure your long-term wishes are respected.
At Goughs, our experienced care home solicitors are here to help you navigate the complexities of care home fees and the surrounding legal considerations. Whether you’re considering gifting property to loved ones or simply want to plan ahead, we can provide tailored advice to protect your interests and comply with care funding rules.
