With one in four of us likely to need care in our old age, the issue of paying for care home fees has never been more common. Exploring options to reduce capital/savings/assets has become popular, including placing property into trust. Is this an attractive way of avoiding care fees?  What is deliberate deprivation of capital?

For example, take a lady who is 78 who has mobility issues and is struggling with day-to-day living. After much deliberation, it is decided that a care home is the most sensible move for her. She has a property worth £300,000. She does not wish this included in the means test to fund her care and would rather pass this on to her children. Accordingly, she enquires about placing the property in to trust for the benefit of her children. Not only will this ensure that her children benefit from a substantial asset, but this will mean that her home will not be included in her overall asset total for the purposes of funding her care. What a great thought! If only it was that simple.

If you are going to live in a care home and intentionally deprive yourself of a capital asset, such as your home, in order that you pay less in care home fees, the Local Authority may assess that asset as still belonging to you. Fundamentally, the view could be taken that you have deliberately deprived yourself of capital so that you do not have to pay the entirety of your care fees. Local Authorities are now fully aware of the steps that are being taken by some to mitigate or avoid costs and are challenging cases where they believe deliberate deprivation may have taken place. When the Local Authority carries out your financial assessment to determine how much funding you should receive, they will ask whether you own or have ever owned property. If the answer is yes, then further enquiries are made.

The Charging for Residential Accommodation Guidance for Local Authorities, also known as CRAG, gives examples of what constitutes deprivation:

• A lump-sum payment has been made to someone else - for example, as a gift or to repay a debt;
• Substantial expenditure has been incurred - for example, on an expensive holiday;
• The title deeds of a property have been transferred to someone else; or
• Money has been put into a trust which cannot be revoked.

Timing is key. Although there is no restriction on how far back the Local Authority can go back when considering deprivation of assets, they will pay particular attention to the timing of and reason for the disposal of the asset. The circumstances leading up to the disposal, such as whether it was reasonable for you to foresee that you would require to be admitted to a care home, are also considered.

If you are found to have deliberately deprived yourself of capital and assets you will be treated as having 'notional capital' to the value of the capital you disposed of. If, when added to your actual capital, it comes to more than the threshold allowed, then the Local Authority could assess you as being liable to meet the full cost of your own care.

There may of course be other reasons for disposing of your assets or transferring ownership of your home and taking good legal and financial advice on your long term wishes is vital. If you would like further advice please do not hesitate to contact us.