FAQs: Social Care Funding & Deprivation of Assets

1. What is deprivation of assets?
2. You are Property and Finance Attorney for your aunt who pays for her own care and currently has savings of £100,000. You have used some of her savings to give your two siblings £3,000 a year for the past five years because they are unwell and to make use of the Inheritance Tax rules. You plan to do the same this year. Could you be accused by the Council of deprivation of assets?
3. You and your wife combined your assets with your disabled father’s assets to buy a house that you could all live in together, to care for him. The new house had to be put in you and your wife’s name to get a mortgage. The Council have said that your father has ‘deprived himself’ of the value of his old property and that he must pay for his care fees. He pays £500 per week for agency carers to visit him while you are at work and cannot afford these fees alone. How can you get the Council to overturn a deliberate deprivation of assets decision?
4. Eight years ago, after your husband died, you sold your house and gifted the sale proceeds to your children to help them buy their own property. You moved into rented accommodation and have been using your savings to pay for a care agency to help you at home. Your memory is declining and you have been told to move into a care home. The Council did a financial assessment and say that the gifts to your children were a deprivation and that you will have to pay for your care home fees or get the money back from your children. Are gifts ignored by Social Services under the Inheritance Tax Rules after seven years?
5. Your mother and father are retired and in reasonable health for their age. You are their only child. They recently attended an asset protection seminar. They want to transfer their house into your name for tax purposes and keep a ‘life interest’ in the house so they can remain living there. Their house is worth £600,000. Could they be accused of deprivation of assets if one of them develops care and support needs?
6. Your Aunt is waiting to be discharged from hospital after a bad fall. She needs a rehab or temporary Nursing Home placement until she is well enough to return home. She cannot pay for her care because a year ago, she invested all of her savings and the sale proceeds of her home in a scheme that turned out to be a scam. Will Social Services accuse your aunt of deprivation of assets if she has been scammed?
7. You are Deputy Property and Finance for your sister. She was severely injured in a road traffic accident in which her husband died. Their sons were 16 and 18 at the time. You have used some of the income and capital that your sister inherited from her husband to pay your nephews’ university living costs and other expenses that you have considered your sister would have wanted to fund. You have had Court of Protection permission for this. Can you continue to use your sister’s money as Deputy to support her children without Social Services alleging deprivation?
8. You are attorney for your 86 year old mother who moved to a care home last year. She gave you half of the sale proceeds from her flat and has used the rest for her care fees. You are about to ask Social Services to help pay her care costs. A friend has told you that there is a deprivation of assets loophole called the ‘deprivation of assets 6 month rule’ so the gift is ignored because it was made a year ago. Is this correct?

What is deprivation of assets?

The term ‘deprivation of assets’ is used by Local Authorities (LA) when they believe someone has made a gift or transfer of assets to a third party, usually a relative, to avoid or reduce their liability to pay for care.

The LA has a duty to help a person with their social care costs when their assessable assets drop to £23,250, at which stage the LA will undertake a financial assessment or means test.

If the LA decides that a person has intentionally ‘deprived’ themselves of assets, the financial assessment will treat the person as still owning the value of that asset. This is called ‘notional capital’ and the LA will treat the person as self-funding even though they do not have assets above £23,250.

Whether someone has deprived themselves of assets or not is a complex issue and may depend on the timing of the transfer, the reason for the transfer and whether the need for care was foreseeable before or at the time of the transfer.

You are Property and Finance Attorney for your aunt who pays for her own care and currently has savings of £100,000. You have used some of her savings to give your two siblings £3,000 a year for the past five years because they are unwell and to make use of the Inheritance Tax rules. You plan to do the same this year. Could you be accused by the Council of deprivation of assets?

Even though your aunt has enough money to pay for her care fees, it won’t be long before her savings fall below the ‘upper capital limit’ of £23,250. As her Attorney, you will then need to ask for a Social Services financial assessment to help pay for her care fees.

Because you have gifted money that your aunt would otherwise have had available to pay for her care, Social Services may consider this a ‘deprivation.’ This may mean that your aunt has to keep paying for her care from the value of the money that was given to your siblings, even though she does not have it. This is known as ‘notional capital’.

Rules about paying for care differ from Inheritance Tax Planning rules. There is no such thing as a deprivation of assets ‘seven year rule’. You should not make any further gifts of £3,000 to your siblings until you have taken advice from our specialist Community Care Team.

You and your wife combined your assets with your disabled father’s assets to buy a house that you could all live in together, to care for him. The new house had to be put in you and your wife’s name to get a mortgage. The Council have said that your father has ‘deprived himself’ of the value of his old property and that he must pay for his care fees. He pays £500 per week for agency carers to visit him while you are at work and cannot afford these fees alone. How can you get the Council to overturn a deliberate deprivation of assets decision?

The Council believe that your father’s decision to sell his house and invest the proceeds in a property that is not in his name was an ‘intentional deprivation of assets’.

However, as your father is living in the property and as you are providing his care when you are not at work, this deprivation decision seems unfair, as if he was still living in his own house, his equity would be ignored. Also, your father retains an interest in the property even though it is not in his name.

Your father has a right to challenge the Council’s decision through their complaint process. He will need to give a detailed explanation of the circumstances in which he didn’t put his name on the legal title.

There are some complicated trust law arguments that you could use, so you should seek specialist advice to show the Council that this is not a deprivation of assets.

Eight years ago, after your husband died, you sold your house and gifted the sale proceeds to your children to help them buy their own property. You moved into rented accommodation and have been using your savings to pay for a care agency to help you at home. Your memory is declining and you have been told to move into a care home. The Council did a financial assessment and say that the gifts to your children were a deprivation and that you will have to pay for your care home fees or get the money back from your children. Are gifts ignored by Social Services under the Inheritance Tax Rules after seven years?

The rules governing gifting and local authority financial assessments are not the same as the Inheritance Tax rules.

Unfortunately, there is no deprivation of assets “7-year rule” when it comes to paying for care and the Council can go back as far as they wish when investigating deprivation of assets.

However, from what you have said, the Council may have failed to apply the correct legal test about deliberate deprivation. This test should look at your health at the time and what your intentions were.

Your mother and father are retired and in reasonable health for their age. You are their only child. They recently attended an asset protection seminar. They want to transfer their house into your name for tax purposes and keep a ‘life interest’ in the house so they can remain living there. Their house is worth £600,000. Could they be accused of deprivation of assets if one of them develops care and support needs?

If one or both parents ask the Council for help paying their care fees in the future, a Social Services’ financial assessment will look at their assets. Despite the explanation that they are doing this for tax purposes, the Council may be suspicious and believe that your parents’ real motivation is to avoid paying care fees in the future.

If your parents keep their home in their own names and one of them did need to go into a care home, provided the other one was still living at home, the value of their property would be disregarded in full under Social Services’ financial assessment rules.

However, if the title is transferred to you, then at best, there will be a costly and long dispute with Social Services who are likely to make a deprivation allegation.

Paying for care fees can be complex and difficult to navigate, so we recommend seeking advice to help your parents make an informed decision, including understanding the risks.

Your Aunt is waiting to be discharged from hospital after a bad fall. She needs a rehab or temporary Nursing Home placement until she is well enough to return home. She cannot pay for her care because a year ago, she invested all of her savings and the sale proceeds of her home in a scheme that turned out to be a scam. Will Social Services accuse your aunt of deprivation of assets if she has been scammed?

It is possible that Social Services will decide that your aunt has deprived herself of assets, because some Local Authority Financial Assessment teams do so whenever a large amount of money has been spent or given away.

However, in your aunt’s case, it would be hard for the Local Authority to show that the legal test for deprivation is met. Your aunt’s decision to invest everything she owned was unwise, but her motivation was not to avoid paying for her future care and support needs.

You are Deputy Property and Finance for your sister. She was severely injured in a road traffic accident in which her husband died. Their sons were 16 and 18 at the time. You have used some of the income and capital that your sister inherited from her husband to pay your nephews’ university living costs and other expenses that you have considered your sister would have wanted to fund. You have had Court of Protection permission for this. Can you continue to use your sister’s money as Deputy to support her children without Social Services alleging deprivation?

Social Services might say this is deprivation because your sister had a need for care and support when the payments to her son began. They could say you should have kept her money to pay for her care, and that you are trying to protect her assets from care home fees.

However, they will have to show that her motivation was to avoid care costs. As your sister’s Deputy, your motivation was to support her sons through a difficult period to ensure they could continue their education after their parents’ accident. The Court of Protection permission may be helpful evidence if the Council makes a deprivation decision.

Social Services do not always take a common-sense approach when looking at gifting. It is important to obtain specialist advice to protect your position as Deputy.

You are attorney for your 86 year old mother who moved to a care home last year. She gave you half of the sale proceeds from her flat and has used the rest for her care fees. You are about to ask Social Services to help pay her care costs. A friend has told you that there is a deprivation of assets loophole called the ‘deprivation of assets 6 month rule’ so the gift is ignored because it was made a year ago. Is this correct?

No, this is incorrect. Before the Care Act 2014 came into effect, there was a six month limit on Social Services’ ability to take action against the recipient of a gift. The Care Act abolished this limitation and the fact that the gift was over six months ago does not mean that it is not classed as deprivation of assets. As your mother had care needs at the time of the gift, then it is very likely that Social Services will say it was a deliberate deprivation of assets and refuse to help with her care fees.

If you or your family require specialist Community Care Law advice on deprivation of assets, please contact us on 01273 609911, or email info@ms-solicitors.co.uk to find out how our Community Care Law Team can help.