Deprivation of Assets Rules

Deprivation of assets occurs when a person reduces their capital in a deliberate way, and a significant motivation for doing so was to reduce the amount they would contribute towards the cost of care. Common examples include:

• Giving away large sums of money to children or grandchildren;
• Transferring the family home into a child's name;
• Setting up a trust to hold assets;
• Spending capital on luxury items shortly before entering care;
• Paying off debts to family members that may not be genuine.

The key legal test is whether avoiding care costs was a significant motivation — not the only motivation. A person may have genuinely wanted to benefit their family AND reduce care costs. If avoiding care costs was a significant (not necessarily the only) reason, the council can treat the deprivation rules as applying.

If the council decides a deprivation has occurred, it applies the notional capital rule: it treats you as still possessing the capital you gave away. If this notional capital takes you above the upper capital threshold (£23,250), you will be required to pay the full cost of care as if you still had the assets.

Importantly, there is no time limit on how far back the council can look. A gift made ten years ago can still be treated as deprivation if the council believes avoiding care costs was a significant motivation at the time. In practice, gifts made very far in advance of care needs arising are less likely to be treated as deprivation, but the council retains discretion.

If notional capital exceeds the upper threshold, it is assumed to diminish over time at the rate you would have been paying for care. This notional capital spend-down continues until it falls below the upper threshold, at which point the council begins to contribute to costs.

Not every transfer is deprivation. Transfers that are not deprivation include:

• Spending money on a holiday or experience when you did not anticipate needing care;
• Making gifts at a time when you could not have foreseen needing care;
• Gifts that were clearly motivated by other reasons (generosity, family need) and where avoiding care costs was not a significant factor.

The burden of proof is on the council to demonstrate that avoiding care costs was a significant motivation, not merely a consequence. If you dispute a deprivation finding, challenge it through the complaints procedure and provide evidence of the genuine reasons for the transfer.

If you are considering making significant financial gifts and may need care in future, seek specialist legal and financial advice before proceeding. A later-life financial adviser accredited by SOLLA can help you understand the implications.