Guide to deprivation of assets rules

Many older people want to leave their loved ones an inheritance after they are gone, but the reality of paying for elderly care can mean that the person’s assets are needed to pay for their care in later life. If the local authority is arranging social care for an older adult, they assess eligibility for funding by taking into account the individual’s capital (property, savings and income) to work out how much the elderly person needs to pay towards their care themselves.

The more savings and other assets that a person has, the more they are required to pay themselves for their care. To try and avoid this, some people decide to give away some of their savings, property or other assets, usually to loved ones, to deliberately attempt to avoid paying for their care. This is known as deprivation of assets.

If the local authority decides that an individual has deliberately reduced their income or assets to avoid paying care fees, they can choose to calculate the fees as if the assets are still owned or simply decide that the individual isn’t eligible for any funding assistance. This might have significant consequences when it comes to care cost affordability.

In this article, we look the deprivation of assets rules and answer some common questions that people have on the topic.

Jump to:

• What counts as deprivation of assets?
• What is the deprivation of assets 7-year rule?
• Is deprivation of assets a criminal offence?
• Does a funeral plan count as deprivation of assets?
• What isn’t considered deprivation of assets?
• Discussing care costs and finances with elderly loved ones
• Extra peace of mind if living at home in later life

What counts as deprivation of assets?

Deprivation of assets relates to deliberately reducing income or assets to avoid it from being taken into account for social care funding. That means that if someone knowingly disposes of savings, property or other financial assets before being assessed for social care funding, this may be considered as deprivation of assets, depending on the individual circumstances involved.

Some of the common ways in which deprivation of assets may be identified could include:

• ‘Gifting’ significant sums of money to family members unusually
• Transferring the deeds of a property to someone else
• Spending large sums of money on things that are unusual or out of character and may be seen as ‘extravagant’. This could include things like luxury items or vehicles.
• Gambling with large sums of money unexpectedly or unusually
• Moving assets into a ‘trust’ that can’t be revoked
• Not declaring all assets for the purposes of social care funding assessment
• Selling property or other assets for below market value e.g. to a family member

Personal possessions are not considered ‘assets’ for the purposes of a social care funding assessment, so someone turning savings into possessions, in a way or window of time that might be considered unusual, could potentially be judged to have deliberately deprived themselves of assets.

As everyone’s circumstances are different, any changes or movement of financial assets will be looked at individually during a local authority assessment. The motivation behind transactions will be looked into, along with the timings of the change or action.

What is the deprivation of assets 7-year rule?

It is a commonly held belief that there is a cut-off of seven years for gifting your assets to loved ones and it having an impact on social care funding assessments. With inheritance tax rules, there is a 7-year rule, which means no inheritance tax is due on gifts given at least seven years before passing away.

However, the same rule doesn’t apply to deprivation of assets. There is no limit to how far back the local authority team can look into someone’s finances to help them decide if there was a deliberate deprivation of assets. Instead of the specific amount of time since the asset was gifted or changed hands, it will depend on other factors, such as the individual’s health and intentions when it happened.

Is deprivation of assets a criminal offence?

Deliberate deprivation of assets is a criminal offence. However, it is usual for local authorities to try and work with older individuals and their families to resolve the situation rather than to try and take legal action against them.

Depending on the circumstances, the local authority might take action to try and recover assets from those they were gifted to.

Does a funeral plan count as deprivation of assets?

Many people choose to purchase a funeral plan or pre-pay for their funeral in their later years. In many cases, this wouldn’t be considered as deliberate deprivation of assets unless there is evidence that the funeral plan or pre-payment scheme was entered into with the timing and knowledge that it would reduce the individual’s financial assets to avoid paying social care fees.

For example, someone who pre-paid for their own funeral while in good health, with no care needs or support required or received, it would usually not be considered as deprivation of assets.

What isn’t considered deprivation of assets?

There are no hard and fast rules when it comes to deprivation of assets, because every situation is unique. It is the role of the local authority assessment team to look at financial records, speak to those involved, review all of the details and ultimately decide whether they believe that deprivation of assets has occurred.

Their considerations would usually include:

• The length of time since the asset was gifted or transferred
• The needs or circumstances of the recipient of the gift or asset
• Whether the gifting or transfer of assets was part of a pattern of similar behaviour
• The intentions of the individual at the time of the gift or transfer of assets.

Many older adults want to gift their loved ones with things during their lifetime and there is absolutely nothing wrong with this. However, it’s important to consider the timing and motivation of giving gifts or transferring assets to help ensure that you’re not found to be deliberately disposing of assets to avoid paying a greater share of care costs.

Discussing care costs and finances with elderly loved ones

It can sometimes be quite challenging to talk to older relatives or friends about care plans for later life or finances related to that. It’s a subject that some people find uncomfortable, but it’s important to have conversations on this topic as early as possible to best help everyone involved.

At TakingCare, we have a range of resources to help older adults and their loved ones start talking about important things related to their future care and financial provision. These include:

• #HaveTheTalk – Offering personalised advice designed to help families and loved ones have those important conversations
• Psychologist tips for having conversations about care with elderly parents
• A look at the reality of elderly care costs
• Support with planning later life

Extra peace of mind if living at home in later life

For those who are living at home in later life, whether with some social care support or not, it can be a real concern for loved ones that something might happen when no one else is around. One solution that can potentially help bring additional peace of mind for everyone could be a personal alarm system. With a single press of the alarm, which is worn at all times, a call is made to the Emergency Resolution Team, who monitor the alarms 24/7, every day of the year.

Some alarms can also automatically detect falls, which means that if the alarm wearer is not able to press the button, isn’t conscious or is unable to speak, the alert can still be raised. With a variety of different products with features to suit lots of different situations and lifestyles, you can view our full range of personal alarms here, including elderly fall alarms, GPS personal alarms and GPS trackers for seniors.