Deprivation of assets to avoid paying for care home fees

Deprivation of assets means you have deliberately reduced your overall assets to avoid paying care home fees.

Assets include the value of savings, property and income which your local authority includes in the financial assessment. This will be used to determine how much you should contribute towards your social care. Some people assume if they transfer home ownership to their children, they are protecting their home from being used for care home fees.

However if the local authority believes you have intentionally deprived yourself of assets, such as giving away money or transferring property, they may include the value of these assets in the means test to determine your contribution towards care costs.

How do you get council funding for care home fees?

Around half of people aged 65 and over in the UK receive council funding for their care home costs. The amount of help with care costs you get from social services depends on the value of your assets. The more your assets are worth, the more you have to contribute.

Following a needs assessment, if your local council thinks you need to move into a care home, they will conduct a financial assessment. This means test will show if you are eligible for financial support.

If you move into a care home permanently, your home will be included in the means test unless your partner still lives there, or a relative in some circumstances. 

The thresholds for state-funded care vary from country to country. For example, the upper limit in England is £23,250. If your assets are valued over this amount in the means test, you will have to pay all care fees yourself.

You can get more information on help with care home fees in our article Care home costs and fees advice | How to pay.

Paying for care home fees completely out of your own pocket is expensive. Some people have to sell their homes to afford long-term residential or nursing care. People sometimes consider reducing their assets to get below the threshold and qualify for social care funding.

What counts as deprivation of assets?

Most people will in their lifetime gift either money or assets to family members and relatives. Intention, amount and timing are central to deciding whether the transfer can be considered deliberate deprivation of assets.

During the financial assessment, the local authority will ask about property ownership and bank statements. If they show you have quickly reduced your wealth, the local authority may allege deliberate deprivation of assets.

What counts as deliberate deprivation of assets?

• Gifting a lump sum of money to a family member or friend
• Transferring property into someone else’s name
• Selling a property to someone for less than it is worth
• Buying or gifting expensive items
• Suddenly spending unusually large amounts of money
• Gambling
• Putting money into a trust

There could be other legitimate reasons for the above. So the council must consider the timing and the intention of the actions. For a purchase or transfer to count as deliberate deprivation of assets, the local authority must prove you were aware you might need care in the near future.

What assets are exempt from care home fees?

There are certain assets which are exempt from care home fees

Assets which can be exempt are:

• Personal possessions: These include items such as a car, boat, jewellery, clothing, furniture, etc. But if they are of high monetary value and are considered an investment rather than a personal possession, they may not be exempt. 
• Life insurance policies: The surrender value of a life insurance policy is typically exempt. 
• Annuities: The capital value of an annuity may be exempt. 
• Occupational pensions: The capital value of an occupational pension is usually exempt. However the income from it is not exempt.
• Trusts: The value of certain trusts, such as a reversionary trust, may be exempt. A life interest trust may also be exempt. 
• Main home: The main home is disregarded for the first 12 weeks of permanent residential care. If a spouse, partner, or certain other relatives (if they are over 60, under 16, or incapacitated) live in the main home, it will not be included as an asset. 
• Personal Injury awards: A personal injury award is generally disregarded for the first 52 weeks after the initial payment, or indefinitely if it is held in trust. 

What is the 7 year rule for care home fees?

Many people believe there is a 7 year rule for care home fees when it comes to transferring assets. They assume if you give away money or property at least 7 years before you move into a care home, it won’t be taken into consideration. However this is not the case.

There is actually no time limit to deprivation of assets. So any past disposal of assets could be considered. However, the local authority must provide evidence of motive. They must also consider if the amount made any substantial difference to the capital limit, i.e. £23,250 in England.

Intention is the most important factor to consider. When you gave away the large sum of money or transferred your property, was it reasonable for you to expect to need care and support?

If the local authority conducts a needs assessment and concludes you need residential care, it is reasonable to expect you are aware you need care.

If you then transfer a property to a relative for a nominal fee, this could be grounds for deprivation of assets.

People who are found to have deprived themselves of assets, will find the value of the property will still be taken into account in the financial assessment. This is known as notional capital.

Deprivation of capital

If a property you used to own is deemed notional capital, its value may be added to the means test. In which case you will be considered to own more assets than you actually do.

This means you may have to pay care home fees – without a house you could have used to pay for your care. In other words, you could be told you do not qualify for any support. Even if you do not have enough money to pay for it.

How do you challenge a deprivation of assets decision?

If you wish to challenge a decision by your local authority, you can ask for their complaints procedure.

In your complaint, you will need to say why the disposed assets had nothing to do with avoiding care costs. Include evidence and outline the motives behind the disposal of assets.

Evidence could be bank statements, or letters explaining you promised to gift a certain sum of money to your grandchildren.

If you still disagree with the local authority after their response, you can pursue a legal case

If this fails, your final option is to contact the Social Care Ombudsman.