Community Care Law solicitors answer frequently asked questions about Social Care funding and 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.
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.
Rules about paying for care differ from Inheritance Tax Planning rules. You should not make any further gifts of £3,000 to your siblings until you have taken advice from our specialist Community Care team.
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 although 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.
The rules governing gifting and local authority financial assessments are not the same as the Inheritance Tax rules.
Unfortunately, there is no “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.
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.
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.
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.
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.
If you or your family require specialist Community Care Law advice on deprivation of assets, please contact us on 01273 609911, or email firstname.lastname@example.org to find out how our Community Care Law team can help.