Care Home Fee Planning

What is Deliberate Deprivation?

According to the Oxford Dictionary, the term “Deprivation” means, the damaging lack of material benefits considered to be basic necessities in a society. For example, the lack or denial of something considered to be a necessity like “sleep deprivation”. The term “Deliberate Deprivation” is more commonly associated with local authorities and their assessment of one’s assets for care home fees.

When your local authority arranges for you to live in a care home on a permanent basis, they will means test you, to see whether you are required to pay towards the cost of your care. The local authority will decide this by making a calculation based on your current income, savings and other assets.

They do this under existing guidelines and rules set out by the Department of Health.

Deliberate Deprivation Explained

Deliberate deprivation occurs when an individual transfers an asset out of his or her possession to put himself or herself in a better position regarding the means test for care home accommodation.

Like many people, you might want to pass on savings or other assets to your children. However, transferring an asset out of your name does not necessarily mean that it will not be taken into
account in the means test.

Both the Local Authority and the Pension Service can, when assessing a resident’s eligibility for assistance, look for evidence of deliberate or intentional deprivation of capital such as a property.

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 upper allowed limit . Then the Local Authority could assess you as being able to meet the full cost of your own care.

There are a number of ways in which the owner of an asset might transfer it out of his or her possession.

Examples of deprivation of capital?

Transferring the title deeds of a property to someone else.
Lump-sum payments, such as a gift.
Reducing capital through substantial expenditure on items such as expensive holidays or by extravagant living.
Converting money into another form that has to be disregarded from the means test, eg personal possessions, investment bonds with life insurance.
Putting money into a trust that cannot be revoked.
Selling an asset for less than its true value may also be seen as deprivation.

Disposal of assets is not necessarily carried out to avoid a charge for care home accommodation. Or to gain assistance sooner than would otherwise have been the case. For it to be treated as deliberate deprivation, the local authority has to show that a significant intention of deprivation was there, before it can take the transferred capital into account.

Timing

The timing of a transfer may be important in establishing the motivation. For example, it would be unreasonable to decide that a resident had disposed of an asset in order to reduce his or her charge for accommodation. When the disposal took place at a time when he or she was fit and healthy and could not have foreseen the need for a move to residential accommodation.

Often when an individual undertakes a full estate plan at an earlier time in their life, it can be useful with regards to protecting their home and assets from care fees, mainly because it is less likely to be viewed as a last-minute action leading to deliberate deprivation.

Section 21 of the Health and Social Services and Social Security Adjudication Act 1983

States where a resident has deliberately deprived himself or herself of an asset, the Local Authority can recover any sums it consequently has to pay towards a resident’s care costs from the person who the asset was transferred to, as long as the deliberate deprivation occurred within six months of the resident approaching the Local Authority for funding.

If the transfer was made more than six months before, the Local Authority cannot use this section.

This six-month limit only applies to that particular power of recovery. There is no set time limit beyond which the Local Authority has to ignore transfers of assets.

If a transfer occurred more than six months before the resident applies for assistance the Local Authority can still treat him or her as having deliberately deprived themselves of that capital under the charging regulations.

The local authority could initially refuse to fund the resident’s care fees, necessitating a challenge. Or if funding is provided they could treat the funding assistance provided as an accruing debt owed by the resident to the Local Authority.

Summary

It is always advisable to seek out both professional legal and financial advice before proceeding with any care home fee planning. An initial discussion with your estate planning consultant or solicitor shouldn’t cost you anything. And will help you to make an informed decision on the best way to proceed regarding areas such as Care home fees, Wills, Trusts and Lasting Power of Attorney,