Care homes are run by local authorities (councils) and they calculate how much someone should pay towards their care home fees by means testing. So, the more assets a person has the more they are likely to pay towards care fees.
Some people are tempted to transfer their property to their children or give away assets to avoid having to pay care home fees, or to reduce the fees they would have to pay. However, the local authority may consider this to be a ‘deliberate deprivation of assets’ and assess your fees as if you still own the asset.
What are ‘assets’?
In the context of care home fees and a possible deprivation, assets include property, savings, stocks and shares, and cash. It does not include personal possessions, unless of course you use your savings to purchase something to deliberately reduce the amount of your savings. Assets can also include income, including any salary you may earn or your pension.
What could be deemed to be a deprivation?
The obvious example would be to transfer a property to someone else, but it can include making a gift of a lump sum of money, giving away your rights to income, incurring substantial expenditure (which is out of character with previous spending), transferring your assets into a trust, selling assets at an undervalue or, as I mention above, using savings to purchase personal possessions.
What is a deliberate deprivation of assets?
When undertaking means testing, the local authority will look back several years to check whether or not there has been any deliberate deprivation of assets. To prove a deliberate deprivation, the local authority must show that the reason for, or a significant factor in, disposing of the asset was to reduce the amount of care fees to be paid and that, at the time of the disposal, you knew or could reasonably have expected that you would need care and support in a care home.
You may be asked to prove that you no longer own a certain asset, and that you disposed of it by way of a sale, by providing a receipt or a valid gift, by providing a deed of gift. If you cannot prove this, the local authority will assume that you still own the asset and its value would be taken into account when assessing your care home fees.
What can a Local Authority do?
If the local authority decides that there has been a deliberate deprivation, you would be assessed as if you still own the assets or, if you have transferred the assets to a family member, the local authority can recover fees from them instead.
Of course, it is possible to appeal any decision made by the local authority. However, it is far better to seek legal advice before making a gift or transfer of a significant asset.