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Deprivation of assets rules
When individuals in the UK require long-term care, the local authority conducts a financial assessment (also known as a means test) to determine how much they should contribute towards their care home fees. For some, this raises concerns about losing significant assets – especially their home or savings – and prompts the question: can assets be given away or transferred to avoid care fees? This practice is known as “deprivation of assets“, and it can have serious consequences. So, what are the deprivation of assets rules? What actions are likely to be flagged as such by local authorities and what constitutes legitimate planning versus intentional avoidance?
What is deprivation of assets?
Deprivation of assets happens when someone intentionally reduces their wealth – by giving away money, transferring property, or selling possessions for less than their value – to avoid paying care fees.
Local authorities are empowered to investigate whether an individual has intentionally deprived themselves of assets. If they believe this is the case, they can treat the person as if they still own the asset, a process known as “notional capital“.
Common examples of deprivation
The following actions might be regarded as deprivation of assets if undertaken with the aim of lowering care costs.
- Gifting a property to children or relatives.
- Selling a house for significantly less than market value.
- Giving away large sums of money.
- Transferring ownership of savings or investments.
- Moving assets into a trust or offshore account without a clear, unrelated purpose.
Intent is critical: if these actions are taken when a person already requires care or expects to need it, the local authority may interpret this as deliberate avoidance.
See also: Can I give my house to my children to avoid care home fees?
How does the local authority decide?
Among the key factors the local authority considers are:
- Timing: Did the asset transfer happen just before care was required or when care needs were predictable?
- Motivation: Was the primary reason for reducing assets to avoid paying for care, or was it for a different, credible reason (e.g., tax planning, assisting a child in crisis, or longstanding family gifts)?
- Pattern: Are there repeated gifts or asset transfers that indicate a strategy to shield wealth?
The key test is whether avoiding care charges was a significant motivation behind the asset transfer.
What are the consequences of breaching deprivation of assets rules?
If a local authority determines the person has breached deprivation of assets rules:
- They can treat the person as if they still own the asset, reducing or removing eligibility for financial help.
- They may refuse to fund care until the person pays what they would have owed.
- In some cases, authorities can pursue the person who received the asset to recover costs, particularly if they suspect the recipient was aware of the reason for the gift.
All of this can result in legal disputes, financial strain, and delays in obtaining essential care.
What is not classed as deprivation of assets?
Not all asset transfers are regarded as deprivation. Examples of legitimate actions can include:
- Gifts made long before any care needs appeared, with no indication that care would be necessary.
- Spending money reasonably (e.g. on holidays, home improvements, or paying debts).
- Routine gifts on birthdays or Christmas, especially if they reflect a pattern over years.
The longer the interval between a gift and the start of care needs, the less likely it is to be considered deprivation.
Can you plan ahead?
Yes, but exercise caution. While early financial planning is wise, especially when advised by a solicitor or financial adviser, trying to “game the system” can backfire. Transparency and detailed records of why assets are transferred or spent are crucial. It is wise to:
- Document reasons for asset transfers unrelated to care avoidance.
- Seek legal advice before transferring property or significant sums.
- Be realistic about future care needs if you are older or have health issues.
Final thoughts on deprivation of assets rules
Attempting to avoid care home fees by giving away money or property might seem like a way to protect your family’s inheritance, but if it is considered deprivation of assets, it can lead to serious financial and legal repercussions.
Although there are legitimate ways to plan for future care costs, it is essential to take action well before any foreseeable care needs arise and to ensure that any steps taken serve a genuine purpose beyond merely avoiding charges. When uncertain, seek advice from a professional.
Additionally, charity Age UK provides helpful information on the deprivation of assets rules on their website.