WillsWhat is Deliberate Deprivation of Assets?

If a person goes into residential care, their local authority will need to carry out a financial assessment to determine how much that person can contribute towards their care home fees. This is known as the means test. A person’s income and capital will be considered as part of the means test.

If a person attempts to reduce the assets that they own that could be used towards their care fees, this may be considered as deliberate deprivation by the local authority. This article will examine what deliberate deprivation is and what the consequence are.

What is deprivation?

Deprivation is when a person has in some way decreased their assets in order to reduce how much they could contribute towards their own care. The most common way this would be done is by making gifts or putting assets into trust but deprivation is not limited to this. Other ways deprivation could occur could be by a person paying off someone else’s debts, selling an asset for under its value or by converting assets into assets that are disregarded under the means test, for example converting cash to chattels.

In most cases, deprivation will be considering deprivation of capital, however it is also possible for deprivation of income, for example if a person gives or sells the right to income from an occupational pension.

When is deprivation deliberate?

For deprivation to be treated as deliberate the local authority will need to consider the following:

1. The intention to avoid care fees must have been the person’s significant or only factor for the deprivation.
2. At the time of the deprivation, whether the person had a reasonable expectation that they would need care and support from the local authority.
3. Whether the person had a reasonable expectation that they would need to contribute towards the cost of their care needs.

There is no time limit on how far a local authority can look in exploring whether deprivation was deliberate, and it is a misconception that there is a time limit of 7 years or similar as is the case with gifts for inheritance tax purposes.

Deliberate deprivation only applies to a person attempting to avoid paying for their own care. It is therefore not deliberate deprivation for spouses to complete will trusts to protect assets from their spouse/partner’s care.

Consequences of deliberate deprivation?

If a local authority decides that a person has committed deliberate deprivation, for the purposes of the financial assessment they can decide to treat the person as if they still own that asset. This is known as notional income and notional capital.

A decision of the local authority can be challenged.

If assets have been transferred to a third party (including a trust), the third party may be liable to pay the difference between what would have been charged, and what was charged at the time of the assessment. Where multiple third parties are involved, each will not be liable for any more than their proportion. The local authority may use the County Court to recover unpaid debts but should only do this after they have used all other reasonable options.