This is a question I encounter regularly when discussing later-life financial planning with clients.
The short answer is that you cannot deliberately give away assets for the purpose of avoiding care fees without potentially facing consequences under the deprivation of assets rules.
It’s understandable why the question arises.
Many people have spent decades working, saving and building wealth, often hoping to pass their assets on to children or other family members.
Discovering that they may need to use a substantial proportion of those assets to pay for care can be frustrating.
One reaction is to consider transferring money, property or other assets to family members, hoping that doing so will reduce the amount they are assessed as being able to contribute towards their care.
However, there are important rules governing this.
What Is Deprivation of Assets?
Under the Care Act 2014 and its statutory guidance, deprivation of assets is an important consideration when local authorities assess how much someone should contribute towards their care and support.
Broadly speaking, deprivation can arise when someone deliberately reduces the assets they own with the intention of reducing the amount they may be required to pay towards care.
This might involve giving away money, transferring ownership of property or otherwise disposing of assets.
However, the circumstances matter.
Giving away assets doesn’t automatically mean that deprivation has occurred. The local authority must consider the reasons for the transfer and the individual’s circumstances at the time.
The central issue is whether avoiding care costs was a significant motivation behind disposing of the assets.
How Do Local Authorities Assess Deprivation of Assets?
When investigating a potential deprivation of assets, local authorities consider several factors.
1. The reason for disposing of the assets
An important consideration is whether the person deliberately transferred or disposed of assets to reduce their financial contribution towards care.
A genuine gift made for unrelated reasons may be viewed differently from a transfer specifically intended to avoid care fees.
2. The timing of the transfer
There is no universal seven-year exemption for deprivation of assets in relation to care fees.
This is sometimes confused with certain Inheritance Tax rules, but the two areas operate differently.
A local authority can consider when assets were transferred and whether the individual could reasonably have anticipated needing care at that time.
For example, transferring significant assets after becoming aware of an increasing need for care may raise questions about the purpose of the transaction.
3. The effect on the person’s finances
The local authority may also examine whether the transfer materially reduced the individual’s capital.
This could involve a single substantial gift or several smaller transfers over time.
It is the circumstances and intention behind the disposal that are particularly important.
What Happens If Deprivation of Assets Is Identified?
If a local authority concludes that deliberate deprivation has taken place, it may take steps to address the situation when calculating care charges.
This can include treating the individual as still possessing assets that they have given away, sometimes described as *notional capital*.
Consequently, giving away those assets may not reduce the amount a person is assessed as needing to contribute.
There are also circumstances in which a local authority can seek to recover money owed in connection with care costs.
Depending on the situation, this could involve recovery action against the individual or a third party who received the transferred assets.
Legal proceedings through the County Court may be available, although other recovery methods would normally be considered first.
The local authority’s recovery rights and the amount that can be pursued depend on the particular circumstances and relevant statutory provisions.
What If I Gave Away Assets Before I Needed Care?
An important distinction is whether the need for care could reasonably have been anticipated when the gift was made.
For example, someone might make gifts to family members as part of their ordinary financial or estate planning arrangements, without any expectation that they will require care.
This does not automatically amount to deliberate deprivation.
The local authority would need to consider the circumstances at the time, including the person’s health, financial position and reasons for making the gift.
Age alone isn’t necessarily evidence that someone should have anticipated needing care.
Equally, making a gift several years before entering care does not automatically exempt that transfer from scrutiny.
The intention behind the decision, together with the surrounding circumstances, remains important.
Why Professional Financial Planning Matters
Care fees can represent a considerable financial commitment, and it is understandable that people want to protect as much of their wealth as possible.
However, transferring assets without fully understanding the consequences can create significant financial and legal difficulties.
It can also leave someone with fewer resources available to meet their own needs later in life.
This is why it is important to consider long-term care costs as part of a wider financial planning strategy.
An appropriate plan should take account of a person’s financial circumstances, health, family situation and the possibility of requiring care in the future.
It should also consider how any proposed gifts might affect their financial security.
How Wingate Can Help
As a Later Life Planning Specialist at Wingate, long-term care fee planning is one of my areas of expertise.
I help individuals and families explore their options, understand the potential financial implications of care and make informed decisions about their wealth.
If you or a loved one requires care, or you are concerned about how future care costs might affect your finances, please contact me for an initial discussion.
We can explore your circumstances and discuss whether I can help.
