The Thompson Smith and Puxon Wills and Estates team discuss deprivation of Assets.
We are living in a society where people are living longer and as such there are more people than ever requiring support by way of care both in their own homes and in care homes. Due to this and the increasing cost of care fees we are often asked by clients whether they can dispose of assets in order to protect those assets from being swallowed up by the cost of such care. There are however rules regarding what is known as deprivation of assets.
Deprivation of assets in respect of care home fees is a deliberate disposal of assets in order to reduce the amount of care fees a person may need to pay. Examples include transferring property into the names of children, putting assets into trust and gifting sums of money. Where a local authority can prove that the person who disposed of the assets deliberately did so in order to reduce potential care fees, the authority can decide to treat the asset as ‘notional capital’. This means they can still take it into account for the purposes of calculating how much a person should contribute towards their care fees.
There are no time limits imposed on local authorities in respect of how far back they can look at what a person has done with their assets. This means that even where disposals are made many years in advance of care fees needing to be paid, if avoidance of care fees was a significant reason for disposing of an asset, it can still be taken into account. In some cases the local authority can refuse to fund care or recover sums from those that have received the assets. This means that the person who has received the asset can be put in a difficult position.
In addition to difficulties arising in respect of deprivation of assets there are other risks involved in transferring assets to third parties. If, for example, you transferred your house into the names of your children and they were declared bankrupt or divorced then they may be forced to sell the property, leaving you with nowhere to live. Once you have given an asset to a third party you have also lost complete control of it and have no right to say what happens to it. Again, if you had transferred your property to your children and then needed to move you would have no right to do so and would need your children’s agreement to do so. There are many other risks and issues involved for both the person transferring the asset and the person receiving the benefit. It is therefore important that you seek independent legal advice before making any decisions regarding the transfer of assets.
For more advice in this area or for Wills, Lasting Powers of Attorney and Estate Administration (Probate) the team can be contacted on email@example.com or by telephone on 01206 574431.