By Sandra Moores

Private Client Executive (ACILEx)

Arranging social care in later life can be very costly.  The average cost of residential care now stands at just over £48,000 per year – and that’s without nursing costs. In cities such as London and Brighton, the annual figure is more.

Anyone who has assets above a certain level and doesn’t qualify for NHS support will usually have to pay for some or all of the care themselves. Different thresholds apply for funding care at home.  If you do end up needing social care, the local authority will carry out a free ‘needs assessment’ – a means test – to decide how much you should pay towards your care.

Many people are under the impression that, if you can reduce the amount of your assets by giving away money, property or income, the state will step in and pick up more of the bill. Gifting money to reduce your overall estate is a common part of estate planning – and in theory it could help you qualify for state-funded care in later life.

But – beware! There are very strict guidelines on giving away property and assets. A financial adviser or specialist lawyer can help you understand what these are, and help make sure that you don’t fall foul of the ‘Deprivation of Assets’ rule.

The Deprivation of Assets rule says that if you reduce your assets so these won’t be included in your needs assessment, you may be intentionally trying to avoid self-funding your social care.  The key word is ‘intentionally’. If your local council decides you have deliberately reduced your assets to avoid paying care home fees, they may calculate your fees as if you still owned the assets. It will be as if you had never given them away. This can be emotionally distressing for individuals and their families. Moving into a care home can be very unsettling and the last thing you want is to be worried about money, or whether that money will last as long as you need it to.

If you were fit and healthy, and could not have anticipated needing care and support, then giving away your money may not count as deprivation of assets. However, your local authority will look at the timing of your gifts, to see if you could reasonably have expected to need care and support.  The local authority will also want to know why you were making the gift.  An adviser can help you make it clear that you made the gift in good faith, to help family or friends with school fees, house purchases or medical care for example – not to avoid care home fees.

When your council is deciding whether getting rid of property and money has been a deliberate deprivation of assets, they will consider three things:

• Did you know at the time you got rid of your property or money that you needed or may need care and support?
• Why were you giving the money or assets away?
• Did you give assets away to deliberately avoid paying for care?

It’s not just about giving away a lump sum of money. Would you think of these as deprivation of assets? A council might well think otherwise:

• transferring the title deeds of your property to someone else
• reckless or unusual spending patterns
• gambling the money away
• using savings to buy possessions, such as jewellery or a car, which would be excluded from the means test.

The local authority can in fact look as far back as they like when deciding whether you have deliberately deprived yourself of assets. Whether you gave away an asset last week or ten years ago, it could still be subject to Deprivation of Assets rules.  It all depends on your health at the time of the gift and your intentions in giving the asset away.  If your local council thinks you have deliberately reduced your assets to avoid care fees, it can affect the funding you receive. Not only could you end up having to pay for your care in full, but you might also no longer have sufficient assets to fund those costs.

Arranging social care, whether for yourself or your parents, can be confusing and stressful. In particular, the ‘Deprivation of Assets’ regulations can make you feel like you’re treading on eggshells. Early advice from an adviser is crucial before transferring ownership of assets to someone else. Just to help make sure your best intentions don’t backfire.