Deprivation of Assets And Porperty Gifts

February 15th, 2016

A recent case involved a widow who went into residential care. Three years earlier her husband died and as their home was owned jointly as tenants in common the husband’s half of it was transferred into a trust for their children under his will. The family decided at that time to transfer the mother’s half of the property into a trust as well ‘to make things easier’ knowing that it may or may not be assessed for the mother’s care needs.

Upon assessment they received a letter from the council’s legal department saying that because the mother was receiving home care at the time of the transfer to the trust she had a reasonable expectation that she would need care and support in the future and, as a result, they would class the gift to the trust as deprivation.

It is well known that when carrying out the financial assessment for care home funding the council will ask a question similar to: ‘Do you or have you ever owned a property?’ If the answer is ‘Yes’ and you have given it away they could then make enquiries as to the reasons why you gifted the asset.

The key point is that if the gift is treated as deliberate deprivation, the local authority will treat it as ‘notional capital’ which will affect the eligibility for local authority funding.

So how does the local authority decide whether there was a deliberate deprivation?

There may be more than one reason for disposing of a capital asset, only one of which is to avoid a charge for care. Avoiding the charge need not be the main motive, but it must be a significant one.

When deciding if deprivation was ‘deliberate’ the local authority might look at the following:

  • Motive/intention: when disposing of assets, was the main reason to avoid care charges?
  • Timing: there is no set time limit, although local authorities are unlikely to investigate too far back. Most importantly, they will look at the time between the person realising that they needed care and the disposing of assets.
  • Amount: was the gift a significant amount that would make a difference to your relative’s capital limit? The asset would have to be worth a significant amount for the local authority to pursue this action. Giving away a £300,000 property, for example, would significantly affect the individual’s total capital whereas smaller ‘gifts’ – such as giving a £300 ring to a granddaughter – are unlikely to prompt further investigation.

It all boils down to intention. When the person made the gift, could they have reasonably known that they might need care? For example, if the individual was already ill when they signed their property over to a relative, that would look suspiciously like ‘deliberate deprivation’.

Guidance on applying the principles of notional capital are included in the Care and Support Statutory Guidance 2014 (which supplements the Care and Support (Charging and Assessment of Resources) Regulations 2014 and which has superseded the Charging for Residential Accommodation Guide (CRAG)). The guidance incorporates the notion of reasonableness. For example paragraph 12 of Annex E states that ‘it would be unreasonable to decide that a person had disposed of an asset in order to reduce the level of charges for their care an support needs if at the time the disposal took place they were fit and healthy and could not have foreseen the need for care and support.’

Although the transfer of the property into the trust in the circumstances described above was made for a number of reasons (and a desire to hold the entire property in a trust rather than having the ownership split between the trust and the mother may well have made perfect practical sense), since the lady in question was already in receipt of some social security benefits at the time of the transfer to the trust, it is probably unsurprising that the Council decided there had been a deliberate deprivation. Cleary the timing is important. Some individuals have used the so called ‘asset protection trusts’, normally set up well in advance of needing any assistance, unfortunately these have had rather bad press recently, following conviction and jailing of eight people last year for mis-selling such arrangements.