In later life, many of us seek social care assistance, either through your own home adaptations or by moving into a care home. With a means test determining whether you pay your care costs or they are publicly funded, some people consider if it’s possible to give away their assets to ensure that they qualify for state support.
Although you may hear stories of this happening, this practice, known as deliberate deprivation of assets, can cause all sorts of problems and does not guarantee you will receive state support. In this article, we discuss what evidence the Local Authorities may use to prove the intentional deprivation of assets.
Examples of Deprivation of Assets
Giving Your Home to Your Family
Your home is usually your largest asset, and is one that people often consider giving away. However, this will not remove the value of the property from the means test. When your Local Authority carries out a financial assessment to determine whether you are eligible for state support, it will ask whether you own or have ever owned a property.
If the answer is yes, further enquiries will be made and if these indicate that the property was gifted to avoid paying for care, your Local Authority will simply add the value of the property back on to your other assets. No funding will be available until this sum has been sufficiently depleted by care home fees and falls below the lower means test limit.
There are no time limits on how far a Local Authority can go back when considering deprivation of assets. Even if the property was given away prior to any care being needed, the Local Authority could require the recipients of the property to pay an appropriate contribution towards your care.
Asset Protection Trusts
Asset Protection Trusts work by putting a property into a trust for someone else (such as friends and family) so that it is no longer held in the name of the individual seeking care. Fees for these trusts can run into thousands of pounds.
Investment Bonds
This is one of the most common ways people try to protect their assets, as they are technically non-income producing insurance products and are, therefore, exempt from the care fees mean testing process. Local Authorities will include any bond income within the means test, although the longer an individual has owned a bond prior to applying for care support, the less likely the asset will be brought into account.
Gifting Money
People often try to reduce the amount in their own bank accounts by giving away cash to friends and family as a lump sum money gift, possibly to help pay off debts or create a deposit for their own home. If Local Authorities believe that avoiding care fees was a significant reason for any gifted money, the value may still be included in your means test, despite you no longer having that money.
Extravagant Expenditure
For some, the easiest way to reduce their capital is to spend on expensive holidays and an extravagant lifestyle. In such instances, the Local Authority will assess whether asset deprivation was the intention of the expenditure.
The Risks Associated With Asset Deprivation
Whatever method you use to try to protect or reduce capital prior to needing care, there are substantial risks involved. If it is considered that people have deliberately deprived themselves of their assets, these assets can be regarded as ‘notional capital’, meaning it is still taken into account when deciding whether you are eligible for public funding.
If assets have been deliberately transferred to others, the Local Authority can also seek to reclaim them. Previously, this applied if the deliberate deprivation occurred within six months of the individual approaching the Local Authority for care funding.
However, as Local Authorities are short of funds themselves these days, they are now beginning to routinely look further back and they can still refuse to fund care if the transfer occurred more than six months before the application for support. Recently, where assets – particularly property – have been transferred, the Local Authorities simply refuse to fund care at all, rather than going to the trouble of applying to the courts to reclaim them.
Deprivation of assets can have other consequences beyond being discovered by the Local Authority. If long-term residential care is never needed and you have given away the majority of your assets, you may struggle financially in the future. Once an asset has been transferred, it belongs to the new owner who has complete control over it.
Giving away your home, even to family, could cause problems too. For example, if you give your home to your children whilst you continue to live there, and they were unfortunately declared bankrupt or, in the case of a divorce, were forced to sell the property, you would be homeless.
Need Help Protecting Your Assets?
At Hook & Partners, we can act for you in transferring your property to whoever you wish, whilst ensuring you have thoroughly protected your interests and you fully understand the possible risks involved.
If you require dedicated advice about how to protect your assets or wish to set up a trust, Hook & Partners can offer expert guidance on financial decisions to prepare for later life. Call our expert solicitors based in Essex on 01268 692 255 or email info@hookandpartners.com.