While carrying out a financial assessment, local council authorities conduct their own investigations to confirm the data provided by claimants. If they find out that there has been a deliberate deprivation of assets, they have the authority to assign the proportion of the claimant’s contribution towards care home fees including the assets (whether cash in savings or property) that they have disposed of.

However, if the disposing of assets prior to care home residency is merely a coincidence and a care home claimant finds themselves incorrectly charged with deprivation of assets, they may challenge the decision of local authorities and file for an appeal. Some key facts and a list of suggested advisors are available here: Factsheet 40 – Deprivation of assets in social care

What Is The 7 Year Rule Regarding Deprivation Of Assets?

The 7 year rule that applies to inheritance tax is unfortunately not applicable in case of reduction of assets for care home fees. This means that when council authorities conduct a financial assessment of claimant’s investments and savings, they are not limited to a seven year period of study of reduction in assets and can investigate upto as much far back as they would like to.

However the 7 year rule generally states that if someone has gifted their property or a part of it, no inheritance will be applicable on it after a lapse of 7 years.

Certain individuals choose to give their property to their children in order to avoid its inclusion in their financial assessment for care home fees contribution. However, depending on the usual spending patterns, financial considerations, health records and proof of intentions local council authorities can consider this as deprivation of assets.

Another option is to transfer your assets to a trust rather than an individual. In this case, there will be a group of individuals considered as a trust to whom the property’s ownership is entrusted with. 

While this is a feasible option in case of having a legal dependant or a minor who may benefit from the act, however, if it is used to simply avoid care home fees, there are many risks attached. It is advisable for claimants to seek professional financial advice prior to any decision regarding their property. 

For a detailed view of the topic, let’s explore the following topics:

  • Is Deprivation Of Assets A Criminal Offence?
  • What Happens When Deprivation Of Assets Is Proven?
  • What Counts As Deprivation Of Assets?
  • How To Reduce Assets?
  • What Is An Assets And Income Assessment?
  • How Important Is A  Claimant’s Property For Care Home Fees?
  • How Much Savings Can You Have Before You Have To Pay For Care?

Is Deprivation Of Assets A Criminal Offence?

Yes, deprivation of assets is considered a criminal offence simply due to the deliberate reduction of assets by claimants of benefits, especially those who are about to apply for care home residency.

However, in order to prove that a deliberate reduction of assets has taken place, there needs to be evidence supporting that the applicant knew at the time of the said reduction of assets that they will be in need of care home residency shortly. Also, there should  be no other motivation or intention for reduction of assets that may be proven with supportive evidence.

Council authorities may also apply for a judgement debt in Country Court; or in case of false declaration of financial assets in a Social Security form, the individual can be taken to a Magistrate’s Court as the act is considered as a criminal offence.

What Happens When Deprivation Of Assets Is Proven?

Should the claimant have already moved into the care facility and there has been a lapse of time when the discovery of deprivation of assets is made, the claimants will be required to pay the differential in the amount due upon them had their assets been taken into consideration when the initial assessment was made. 

In certain cases when deprivation of assets has been proven, social services have been known to recover the assets transferred to a family member and at times, they have refused to cover care home costs. 

If the claimant has no savings or capital yet they are a homeowner, the council will consider recovering the expense from the proceeds of the sale of the house. This is called a deferred payment and may be considered when the applicant has a capital of around £23,250 (excluding the value of their house).

What Counts As Deprivation Of Assets?

When someone deliberately reduces their assets to avoid having to pay for care home fees and relying on the state to bear most (or all) of their care home expenditure, it is considered as “Deprivation of Assets”.

While most individuals consider that transfer of savings, selling of one’s property or gifting their home to a family member is all that counts as deprivation of assets, that is not all. Any of the following actions will be counted as deprivation of assets if it takes place within a short period of time prior to one’s claim for care home residency:

  • To give away a large sum of money
  • To transfer the title deed of one’s property
  • To spend a large amount of money which is in contrast with the spender’s usual spending pattern
  • To lose money through gambling 
  • To use savings in order to purchase items excluded from a means-test such as a car or jewellery

How To Reduce Assets?

If someone wishes to reduce their assets with the aim to reduce (or completely avoid) paying for their care home fees, they can use any of the following options:

  • Care Annuity: This is an insurance policy that helps to pay for long-term care home expenses.
  • Deferred payment schemes: These schemes are offered by local authorities to serve as a convenient and flexible means to pay for long-term care home fees.
  • Equity release: This includes the release of equity in one’s home to pay for care home fees. 
  • Rental income: This means to rent out one’s property with the aim to generate sufficient income to pay for care home fees, 

What Is An Assets And Income Assessment?

Assets and income assessment is a means-based test conducted by local councils to calculate the amount of care home fee that a claimant will be able to contribute considering their financial status, as the council will be bearing the remainder of the expenses. For this purpose, the income, savings and capital of the claimant will be taken into account.

State Benefits such as Attendance Allowance and Pension Credit will be counted as income. However, in the case of Disability Allowance, there will be no accountability for the same.

Based upon the financial assessment of claimants, they will then be categorised into one of the following slots so that local authorities may decide upon the claimant’s contribution towards their care home fee as well as the amount due on the state: 

  • If someone has savings over £ 23,250, the claimant will have to bear the entire cost of the care home fees
  • If someone has savings of £14,250–£23,250, the claimant will have to contribute most of their weekly income towards care home fees. They will also pay an assumed extra amount of £1 per £250 of capital that they have
  • If someone has savings below £14, 250, the claimant will not be required to pay for their care home fees from this amount and will have to pay from their weekly income. 

How Important Is A Claimant’s Property For Care Home Fees?

One’s home is considered to be the most important part of capital when budgeting care home fees. While the residential property owned by a claimant is considered as capital, however, in case their house is occupied by any of the following, residents, the premises may not qualify to be accounted for in a means test:

  • spouse/civil partner/unmarried partner
  • a close relative over 60 years of age
  • a close relative below 16 years of age (legal dependant)
  • former spouse or partner if they are a single parent

This is called property disregard.

How Much Savings Can You Have Before You Have To Pay For Care?

If you are a UK resident, the amount of savings you can have before having to contribute towards a care home fee depends on whether you live in England, Wales, Northern Ireland or Scotland. Below is the threshold for each country:

  • England: £23,250
  • Wales: £50,000
  • Northern Ireland: £23,250
  • Scotland: £28,750

Anyone who holds savings above this amount will have to contribute towards their care home fees until their savings fall below this threshold. When that homes, claimants will be able to receive financial aid from the state through their local councils. 

Conclusion:

The 7 year rule that nullifies one from inheritance tax does not apply in case of deprivation of assets; enabling councils to to consider financial trends as far back as they would like to. However, according to the Guidance manual on assessment of capital, if the claimant has sold or transferred assets with the intention to:

  • reduce or return the debt that they owe (either to an individual, bank or the state),
  • make credit cards payments,
  • pay for their mortgage,
  • make payments for day to day expenses,
  • improve their quality of life (for e.g by purchasing a new car or rebuilding a kitchen),
  • improve their quality of health through medical expenses, or
  • go on a holiday

it will not be considered as deprivation of assets.

FAQs: What Is The 7 Year Rule Regarding Deprivation Of Assets?

How far back can deprivation of assets go?

There is no time limit on how far back council authorities can go for your means test prior to confirming your eligibility for care home fees. Unlike inheritance tax, deprivation of assets does not reduce accountability after a lapse of 7 years.

Can you be prosecuted for deprivation of assets?

Deprivation of assets is a false declaration of one’s financial circumstances, hence it is a criminal offence. Whether or not a claimant faces court prosecution as a result of deprivation of assets, completely depends upon the results of the investigation carried out by local authorities, the scale and scope of the false claim, as well as the possibility of any recovery to be made.

What counts as deprivation of assets?

When someone deliberately reduces their assets to avoid having to pay for care home fees and relying on the state to bear most (or all) of their care home expenditure, it is considered as deprivation of assets.

Is deliberate deprivation of assets a crime?

Deliberate deprivation of assets is considered as a criminal offence even though on the surface it may only appear to be as a reduction in assets or gifting of property to one’s immediate family.

How much can I gift my children?

Each UK citizen is allowed to receive £3,000 in the form of inheritance or gift money annually. Therefore, this is the amount that you may gift to your children; either in lump sum or over a period of time.

References:

How to protect my property against care home fees

Gifting assets or property to avoid care fees

Deprivation of assets | Social care means tests

Financial Assessment for Care Home Fees Explained – carehome.co.uk

Who Pays for What in 2021/22? – carehome.co.uk advice

Paying care home fees | Social care means tests

Deliberate Deprivation of Assets

Factsheet 40 – Deprivation of assets in social care

Deprivation of Assets

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