A Guide to Deliberate Deprivation of Assets

When a person requires care and support, the local authority may carry out a financial assessment to determine whether they should contribute towards the cost of their care. In some cases, concerns arise about whether an individual has intentionally reduced the value of their assets to avoid paying care fees. This is known as deliberate deprivation of assets.

Understanding how deprivation of assets is assessed can help individuals and families make informed decisions and avoid unintended consequences.

What is Deliberate Deprivation of Assets?

Deliberate deprivation of assets occurs when an individual disposes of, transfers, or reduces the value of their assets with the intention of reducing the amount they may have to contribute towards their care and support costs.

The Care and Support Statutory Guidance defines deprivation as circumstances where an adult has deprived themselves of assets for the purpose of decreasing the charges they may be liable to pay for care and support.

Importantly, there is no fixed time limit within the guidance. Unlike inheritance tax rules, there is no “seven-year rule” that automatically prevents a local authority from investigating previous transfers of assets.

When Does Deprivation of Assets Become Relevant?

Deprivation of assets is only relevant where an individual is seeking financial assistance from the local authority to fund their care.

As part of the financial assessment process, the local authority may request information about an individual’s financial history and investigate previous transactions if they believe assets may have been disposed of deliberately.

How Does a Local Authority Decide if Deprivation Has Occurred?

If a local authority suspects deliberate deprivation, it must consider several key factors and establish that:

1. There has been a disposal or reduction of capital or assets.
2. One of the significant reasons for the disposal was to avoid care charges.
3. At the time of the disposal, the individual had a reasonable expectation that they would require care and support in the future and that such care would involve costs.

All three factors must be considered when making a decision.

What Types of Transactions Are Commonly Investigated?

Local authorities will often scrutinise:

• Gifts of money or property to family members or others.
• Transfers of property ownership.
• Assets placed into trusts.
• Converting assets into forms that may receive favourable treatment in financial assessments.
• Repayment of unsecured debts.
• Significant or unusual expenditure.
• Sudden changes in spending habits or extravagant lifestyles.

The authority will carefully examine both the timing and purpose of the transaction.

Can Gifts Still Be Made?

Yes. Making gifts does not automatically amount to deliberate deprivation of assets.

The local authority should consider the reasons behind any gift or transfer before reaching a conclusion. People are entitled to spend their money and manage their finances as they choose.

Gifts are more likely to be accepted where:

• They follow a long-established pattern of gifting.
• They are consistent with previous behaviour.
• There is no evidence that the individual was anticipating future care needs.
• The gifts were made for genuine personal, family, or financial reasons.

Providing clear evidence of the reasons for a gift can be extremely important.

If a local authority concludes that deliberate deprivation has occurred, it may treat the disposed asset as if it still belongs to the individual. This is often referred to as notional capital.

As a result, the individual may be assessed as having greater financial resources than they actually possess and may therefore be required to contribute more towards their care costs.

Challenging a Deprivation of Assets Decision

A local authority’s decision is not necessarily final.

Where there are valid reasons for a disposal of assets, it may be possible to challenge the decision through:

• Informal discussions with the local authority.
• The complaints process.
• Formal legal representations.
• Judicial review proceedings in appropriate cases.

Many disputes can be resolved without court proceedings if sufficient evidence is provided.

Attorneys, Deputies and Gifts

Special care should be taken by attorneys acting under a Lasting Power of Attorney and deputies appointed by the Court of Protection.

Attorneys and deputies have limited authority to make gifts on behalf of another person. Significant gifts or transfers of assets often require approval from the Court of Protection.

Making substantial gifts without proper authority can result in:

• Challenges from the local authority.
• Investigations into financial management.
• Personal liability for the attorney or deputy.
• Court of Protection proceedings.

Anyone acting on behalf of another person should obtain specialist advice before making significant gifts or transfers.

Seeking Legal Advice

Every case is different. Whether a transfer of assets will be viewed as deliberate deprivation depends on the individual’s circumstances, health, financial position, and intentions at the time of the transaction.

Obtaining specialist advice before making gifts, transferring property, or undertaking estate planning can help avoid future disputes and ensure that all potential risks and consequences are properly considered.

Our specialist Court of Protection and Care Funding team has extensive experience advising on deprivation of assets issues, challenging local authority decisions, and helping individuals and families navigate complex care funding matters.

Frequently Asked Questions (FAQs)