An English Local Authority has recently been criticised for refusing to pay an elderly woman's residential care fees when it learned that she made regular cash gifts to her family after moving into a care home. They believed this to be a deliberate deprivation of capital.
What is a deprivation of capital?
The Local Authority requires a financial assessment be completed for anyone moving to residential accommodation. It follows the Charging for Residential Accommodation Guidelines for Local Authorities. The guidelines state what can be considered to be a deprivation of capital, for example:
- A lump-sum payment made to someone else
- Substantial expenditure incurred
- The transfer of a property to someone else
- Money put into a trust which cannot be revoked
- Money converted into another form which would fall to be disregarded
- Capital reduced by living extravagantly
- Capital used to purchase an investment bond with life insurance
However, these will not necessarily be a deliberate deprivation in all circumstances.
Mrs Y's story
After a stroke in 2007, Mrs Y, aged 80, required to move to care accommodation. She had assets of around £250,000 (including her home) which was over the capital threshold limit for Local Authority assistance in paying her care fees. Mrs Y's house was sold to help pay for her care costs. By January 2015, Mrs Y's assets had fallen below the threshold for Local Authority Assistance and her daughter applied to the Council for help, which was initially granted. When completing the full financial assessment, the daughter advised her mother had gifted regularly to family members (almost £75,000 in total) on recommendations by an Independent Financial Advisor. The Local Authority viewed this as a deliberate deprivation of capital, immediately stopped paying her care costs and demanded repayment of almost £7,000 already paid. The family repaid this but complained to the Social Care Ombudsman about the Local Authority's behaviour.
Why was Mrs Y's regular gifting not a deliberate deprivation of capital?
The Ombudsman found that the Local Authority took these actions without completing a full financial assessment and assumed (without cause) that the gifts were a deliberate deprivation.
The calculations by the Local Authority of the 'deprived capital' were not backed by evidence that the gifts were made with the intention of avoiding care charges. There had been a pattern of gifting by Mrs Y over a number of years prior moving into care. Mrs Y paid the full amount of her care for nine years using more than 70% of her funds.
The Ombudsman has now ordered the Local Authority to reassess Mrs Y and repay any fees to which she is entitled.
It is important when considering transferring or disposing of assets that you take sound legal and financial advice. If you would like further advice please contact our Private Client Team.