UK Deprivation of Assets Rules for Care Funding

The legal framework

Deprivation of assets is addressed in the Care and Support Statutory Guidance issued under the Care Act 2014. The local authority can treat an asset as still owned by the person ('notional capital') where they have deliberately deprived themselves of it to obtain or increase local authority funding for care.

The test

The key test is the person's intention at the time of the disposal. The guidance asks whether avoiding the care charge was a significant motivation. Where it was, the council can apply notional capital rules.

The assessment considers factors such as:

the timing of the disposal relative to needing care;

the size of the gift relative to the person's overall wealth;

the person's awareness of imminent care needs;

whether the disposal was a reasonable thing for the person to do given their circumstances.

No fixed lookback period

Unlike some other UK rules, deprivation of assets has no fixed lookback period. Transfers made many years before the person needs care can still be examined, though older transfers are typically harder to demonstrate deprivation for.

Common patterns

Common patterns that attract scrutiny include:

transferring the family home to children shortly before entering care;

large gifts to family members close in time to the care need;

creating trusts to hold assets and reduce apparent wealth;

buying expensive personal items not commensurate with usual lifestyle;

making 'loans' to family that are unlikely to be repaid.

Legitimate disposals

Not every gift is deprivation. Long-standing patterns of generosity, gifts made in good health well before any care need was foreseeable, and transfers to spouses or for genuine commercial reasons can all be legitimate.

Consequences of deprivation

Where the council finds deprivation, it can apply notional capital. The person is treated as if they still owned the asset for means-test purposes. This can mean self-funding even where the person no longer has the asset to draw upon.

The council can also seek to recover from the recipient of the asset in some cases under the Care Act 2014 powers.

Decisions and appeals

A deprivation finding can be challenged through the council's complaints procedure and, if necessary, the Local Government and Social Care Ombudsman. Judicial review is the ultimate route for unreasonable decisions.

Documentary evidence and the burden of proof

The burden of proof in deprivation findings typically rests with the local authority to establish that deprivation occurred. The standard is the balance of probabilities. Where the local authority can show that the disposal was significant, occurred close to the need for care arising, and had no obvious alternative purpose, the burden may shift to the person to provide an innocent explanation.

Useful documentary evidence supporting a non-deprivation argument includes: medical records showing the person was in good health at the time of the disposal; tax records showing the disposal was made for IHT planning or other long-term reasons; legal advice obtained at the time of the disposal documenting the purpose; bank statements showing the disposal fitted within the person's broader pattern of giving; and witnesses able to speak to the person's state of mind and intentions at the time.

The interaction with inheritance tax planning

Lifetime gifting for IHT planning purposes can conflict with care funding planning. A gift made under the IHT seven-year rule (a potentially exempt transfer) may also be examined under the care funding deprivation rules if the person subsequently needs care. The two regimes use different tests: IHT looks at the seven-year clock from the date of gift; care funding deprivation has no fixed time limit and applies a fact-based test of intention.

Where the IHT motivation is clear and the person was in good health at the time of gift, the gift typically does not amount to care funding deprivation even if care needs arise later. Where the gift was made when care was foreseeable, both regimes can apply: the IHT seven-year clock continues to run, and the local authority can apply notional capital rules.

Specialist advice on the interaction between IHT and care funding rules is increasingly common as families with both significant assets and elderly parents seek to navigate the two regimes coherently. Solicitors with both private client and elderly client expertise are best placed to advise on the combined position.

The Care and Support Statutory Guidance in detail

The Department of Health and Social Care issues the Care and Support Statutory Guidance under section 78 of the Care Act 2014. Annex E of the guidance covers deprivation of assets in detail. The guidance is binding on local authorities; departures from the guidance must be justified on rational grounds and can be challenged by judicial review where the local authority departs without good reason.

The guidance directs local authorities to consider three questions in assessing whether a disposal amounts to deprivation: was avoiding the care charge a significant operative purpose; did the person have a reasonable expectation of needing care; and was the disposal disproportionate to the person's circumstances. All three questions are fact-sensitive and require the local authority to consider the full context.

Council financial assessments routinely ask about gifts and transfers made in the preceding years. The standard question is whether any gift or transfer above a threshold (often GBP 500 or GBP 1,000) has been made in the past few years. Where the person has made significant transfers, the council typically requests more detail and may apply notional capital rules.

Common scenarios and outcomes

A common scenario triggering scrutiny is the transfer of the family home to children shortly before entering care. Where the transfer was made years earlier when the person was in good health and not contemplating care, deprivation is unlikely to be found. Where the transfer was made when care was foreseeable (typically within 18 months to 3 years of needing care, depending on the person's health), deprivation is much more likely to be found.

Another common scenario is large monetary gifts to children, often presented as 'helping with grandchildren's education' or similar legitimate purposes. The local authority will assess whether the gift was disproportionate to the person's wealth and whether it formed part of a pattern of generosity established earlier in life. Gifts made under the gifts-out-of-normal-expenditure exemption for IHT purposes (regular gifts from surplus income) are typically not deprivation because they reflect a settled pattern.

Borrowing strategies (taking out a loan secured against the home, using the proceeds to fund care, leaving the loan to be repaid from the eventual sale) can sometimes be characterised as deprivation if the structure has no other purpose. Equity release schemes used genuinely for retirement income are typically not deprivation; structures designed to deplete capital below the means test threshold can be.

Local authority enforcement and challenge

Where the local authority finds deprivation, it applies notional capital: the person is treated as if they still owned the disposed asset for means test purposes. The practical effect is that the person continues to be assessed as self-funding even though they no longer have the asset to draw upon. The shortfall in care fees is met by the family, by the recipient of the asset, or accumulates as a debt.

The local authority can also seek to recover from the recipient of the asset under section 70 of the Care Act 2014 in limited circumstances. The recovery powers are narrower than the notional capital rules and require specific evidential thresholds.

Challenges to a deprivation finding go through the council's complaints procedure, then to the Local Government and Social Care Ombudsman at lgo.org.uk, and ultimately by judicial review of the council's decision. Judicial review applications must be brought within three months of the decision and require permission from the Administrative Court.

Disclaimer

This article provides general information on UK deprivation of assets rules and is not personal financial or legal advice. The rules are fact-sensitive; specialist advice on care funding and lifetime gifting decisions is recommended.

Frequently asked questions

Is there a lookback period?

No fixed period. The council can examine transfers made at any time, though older transfers are typically harder to establish as deprivation.

Can I give money to family without consequences?

Gifts made in good health well before any care need is foreseeable are generally legitimate. Gifts close in time to care needs attract scrutiny.

Does the rule apply to spouse transfers?

Transfers between spouses are not generally treated as deprivation.

Can the council recover gifts from the recipient?

In some circumstances under the Care Act 2014.

What can I do if the council finds deprivation?

Challenge through the council's complaints procedure, then the Local Government and Social Care Ombudsman, and ultimately judicial review.

Frequently asked questions

Is there a lookback period?

No fixed period. The council can examine transfers made at any time, though older transfers are typically harder to establish as deprivation.

Can I give money to family without consequences?

Gifts made in good health well before any care need is foreseeable are generally legitimate. Gifts close in time to care needs attract scrutiny.

Does the rule apply to spouse transfers?

Transfers between spouses are not generally treated as deprivation.

Can the council recover gifts from the recipient?

In some circumstances under the Care Act 2014.

What can I do if the council finds deprivation?

Challenge through the council's complaints procedure, then the Local Government and Social Care Ombudsman, and ultimately judicial review.