The cost of care – residential care homes in particular – can be very high, so it’s understandable that some people might be tempted to ‘offload’ assets so that they are excluded from the financial assessment.

You might think that ways to reduce assets could include:

  • gifting money or expensive items, such as jewellery, to family or close friends
  • putting money into a trust or tying it up in some other way
  • spending out on extravagant holidays
  • gifting property by transferring it into someone else’s name.

But be warned – there are serious implications to ‘gifting assets’ in these ways, for both the person giving away the assets and the person receiving them. Here we explain the rules for gifting assets, the consequences of doing this incorrectly, and the legal implications of transferring property. 

Gifting assets and a financial assessment

If your relative has capital (savings and assets) worth more than:

  • £23,250 in England and Northern Ireland 
  • £26,250 in Scotland
  • £24,000 in Wales

or a weekly income high enough to pay for care fees, they will not be eligible for local authority funding. If this is the case, they will have to pay for their own care.

For many people, their home is likely to be their most valuable asset. So it’s not unheard of for people to consider ‘gifting’ their property or other assets when facing the residential care financial assessment.

There are, however, strict rules that local authorities will pay close attention to when carrying out a financial assessment.

Deliberate deprivation of assets

When the local authority carries out a financial assessment for residential care they will ask about previously-owned assets, not just those that are owned currently. Remember that with a property, it is quite easy for the authorities to check the ownership ‘trail’.

If they consider that a person has deliberately disposed of assets to increase eligibility for local authority funding, this is called ‘deliberate deprivation’. This might include giving away (gifting) assets, as well as other courses of action, such as selling an asset for less than its true value. For example, there have been cases of people ‘selling’ houses to a relative for a nominal fee such as £10, just so that they can transfer the legal ownership.

Of course, not all disposal of assets is deliberate deprivation - it might have nothing to do with care. Your relative might want to give tax-free sums of money to children or grandchildren so that they can enjoy seeing them spend it, and to avoid inheritance tax. They might want to help family members who are struggling financially, or splash out on a well-deserved ‘holiday of a lifetime’ once they retire.

When might disposal of assets be defined as 'deliberate'?

When deciding if deprivation was ‘deliberate’ the local authority might look at the following:

  • Motive/intention: when disposing of assets, was the main reason to avoid care charges?
  • Timing: there is no set time limit, although local authorities are unlikely to investigate too far back. Most importantly, they will look at the time between the person realising that they needed care and the disposing of assets.
  • Amount: was the gift a significant amount that would make a difference to your relative’s capital limit? The asset would have to be worth a significant amount for the local authority to pursue this action. Giving away a £300,000 property, for example, would significantly affect your relative’s total capital whereas smaller ‘gifts’ – such as giving a £300 ring to a granddaughter – are unlikely to prompt further investigation.

It all boils down to intention. When your relative made the gift, could they have reasonably known that they might need care? For example, if your relative fell ill, was assessed as needing residential care, then signed their property over to a relative the following week, that would look suspiciously like ‘deliberate deprivation’.

However, if they went on an extravagant cruise while they were still in good health and had no idea that they would need care, this might simply be regarded a post-retirement ‘treat’.

Notional capital

Giving away capital can therefore have serious consequences. If a person is found to have ‘deliberately deprived’ themselves of assets, the value of these assets can still be taken into account in the financial assessment, even though they no longer own them.

The value of the assets that they used to have is called ‘notional capital’. The value of a person’s ‘notional capital’ can be added to their remaining assets to form their total financial assets for the financial assessment. So not only could your relative end up having to pay for their care, they might no longer have their house to fund those costs.

Powers of recovery

If the local authority funds someone’s residential care costs and later rules that a person has ‘deliberately deprived’ themselves of assets, they have the power to claim care costs from the person that the assets were transferred to.

Legally, local authorities have the power to recover costs within six months of the resident approaching them for funding. If the transfer was made more than six months before this time, the local authority cannot use this law.

Your right to appeal

The council’s decision must be reasonable and there is a right of appeal if you, or your relative, feel that an unfair decision has been made. If your relative wants to make a complaint or appeal a decision, they should contact their local authority. See Challenging a local authority decision for the process to follow.

Seek legal advice

If your relative is considering gifting any assets, particularly transfer of a property, they will need to seek legal advice to make sure it’s done properly. The Law Society has produced detailed guidelines for solicitors on gifts of property and their implications for long-term care. Make sure that any solicitor your relative speaks to is aware of these guidelines (see Useful organisations and websites).

More information

  • Legal transfer of property: make sure you are doing things right by referring to this guide.
  • Find a care home: use our care services directory to find local care homes as well as domiciliary care agencies and local support groups for people living with dementia.

Page last reviewed: 30 November 2015
Next review due: 28 February 2017