Deprivation Of Assets Loopholes

Deliberate deprivation of assets to reduce one’s contribution towards care home fees or increase the scale and scope of stet benefits that they may be able to claim can be proven when local authorities investigate the financial transactions of a claimant as part of their means test for benefits eligibility.

Claimants must keep in view that in addition to proof of reduction of assets, their intentions for the reduction as well as records of their mental and physical health will also be considered as part of their financial assessment.

What Are The Loopholes To Avoid Deprivation Of Assets?

While there are no loopholes to avoid deprivation of 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 are 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.

Certain individuals choose to gift their property to their children in order to avoid its inclusion in their financial assessment for care home fees contribution. However, if this grant takes place with the intention to deliberately reduce assets to avoid care home fees, local council authorities can consider this as deprivation of assets and reclaim the assets.

Another option of asset reduction that is frequently used is to transfer one’s 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.

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.

To learn more about the topic, we will discuss the following areas:

Is Deprivation Of Assets A Criminal Offence?
What Counts As Deprivation Of Assets?
How Can Council Find Out About Deprivation of Assets?
How Important Is Claimant’s Property For Care Home Fees?
What Is An Assets And Income Assessment?

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 the below essential actions for deprivation of assets to be applicable:

The applicant knew at the time of the said reduction of assets that they will be in need of care home residency shortly

There appears to be no other motivation or intention for reduction of assets that may be proven with supportive evidence

Should the claimant have already moved into the care facility and there has been a lapse a 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.

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 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 Can Council Find Out About Deprivation of Assets?

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

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).

How Important Is 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 pr partner if they are a single parent

This is called property disregard.

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.

If the results of someone’s assets and income assessment reveal low income, low capital or low savings, council authorities will increase their contribution towards their care home fees. In some cases, especially when an increase in the claimant’s income or assets is expected, even if the council bears their expenses in the short term, they will design a recovery plan for the future.

Conclusion:

According to Factsheet 40 – Deprivation of assets in social care, looking for loopholes in an attempt towards deprivation of assets is not advisable. Even if you are successful in a deliberate reduction of assets to increase state funding towards care home fee or benefits claim, once local authorities conduct an investigation for the claimant’s financial assessment, not only will the date of sales or transfer be revealed but they may also be able to take legal action.

When deprivation of assets is proven, local authorities have the legal capacity to either reclaim the property or recover the dues that are applicable keeping the asset(s) in consideration of the claimant’s ownership.

FAQs: What Are The Loopholes To Avoid Deprivation Of Assets?

Can you be prosecuted for deprivation of assets?

This depends upon the results of the financial assessment conducted by local authorities. If they are able to find substantial evidence to prove that a deliberate deprivation of assets has taken place, they can take actions including reclaiming the property, reduction in benefits, or even prosecute the claimant as deprivation of assets is a criminal offence.

What is not classed as deprivation of assets?

If someone 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.

How far back can deprivation of assets go?

While the general rule is to consider a seven-year period between reduction of assets and benefits claim, in case of certain situations, deprivation of assets can go back without any limit. The assessment will also take into consideration the spending patterns of the claimant as well as their health records.

How much money can I gift each year?

According to the MHRC, individuals can gift up to £3,000 each year without being considered for a tax deduction or asset deprivation. This amount can be gifted to one individual or it may be spread across different individuals.

Are next of kin responsible for care home fees?

Unless you share a joint property or joint assets with a family member, they are not responsible for paying for your care home fee; however, they can choose to do so voluntarily.