Deprivation of Assets
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This is to prevent people from, say, giving their house to their children and then expecting the state to fund their long term care.
Interestingly...
There is no time limit. The local authority can look back as far into the past as they wish.
However, the local authority could not consider deprivation if the gift were made when you were fit and healthy and had no expectation that care would be required.
Inheritance Tax Rules
Many people confuse the deprivation of assets regulations with the Inheritance Tax rules. There is no seven year time limit or annual allowance of £3,000 a year.
The Purpose of the Gift
This is crucial to the regulations. The authority must consider that avoiding paying for care was a significant reason for the disposal. Sometimes gifts made for inheritance tax planning may be allowed.
Each case is different.
Although the rules allow the local authority plenty of scope to investigate, generally they are looking for abuse of the system. Therefore large and unusual gifts made after a diagnosis of an illness or where there is an established need for care are more likely to be regarded as a deprivation whereas gifts that are part of a regular pattern of giving established by a healthy person may not be.
Notional Capital
If the local authority decides that a gift was a ’deprivation of assets’ the gift will be regarded as notional capital. That is, you will be treated as though you still owned that asset.
The notional capital will be reduced each month as though you were paying for your care. Once your total capital, including the notional capital, reduces to the upper funding limit, the local authority will start to fund you.
If the local authority believe that you cannot pay for your care they may use the provisions of the Health and Social Security Adjudication Act 1983. If the gift or transfer was made within the past six months they may charge the person who received the gift for your care.
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