We have seen an increase in local authorities seeking advice about deprivation or dissipation of assets in the context of care home and nursing home fees. This can be a significant issue given the ageing population and the substantial cost of long-term care. This article provides an overview of the considerations a local authority should take into account when considering whether there has been a deprivation of assets.

Assessing a person's means

A local authority assesses an individual's financial position to determine whether they are required to contribute towards the cost of their care. This is known as a financial assessment or means assessment. A large proportion of individuals are assessed as being able to contribute towards the cost of their care from their own resources. 

The table below outlines the level at which an individual will be required to contribute towards care costs:

These capital limits remain the current limits for England in the 2026/27 financial year. 

What is dissipation of assets?

In an effort to preserve their personal assets from being used to contribute towards the cost of their care, some individuals transfer assets out of their estate before a local authority undertakes a financial assessment. This is commonly referred to as deprivation or dissipation of assets.

The Care Act 2014 and accompanying statutory guidance allow local authorities to consider whether a person has intentionally deprived themselves of capital or income in order to reduce or avoid care and support charges. An asset may include both capital and income and deprivation can take many forms, including: 

• transferring legal ownership of a property to another person;
• making substantial gifts to family members or third parties;
• transferring capital into a trust;
• converting capital into a form that is disregarded for assessment purposes; or
• entering into any other arrangement designed to reduce the assets available for a financial assessment. 

If a local authority concludes that a person has intentionally deprived themselves of assets to reduce liability for care charges, it may treat the person as still possessing the value of those assets when determining their contribution towards the cost of care.

How is dissipation assessed?

Local authorities assess alleged deprivation of assets on the facts of each case. There is no single determinative test and all available evidence should be considered.

The evidence will ordinarily need to address two key questions.

1. Foreseeability: Could the individual reasonably have foreseen a need for care and support at the time of the disposal? This assessment should focus on the individual's circumstances at the time of the transfer rather than with the benefit of hindsight. Relevant evidence may include medical records, social care involvement, professional assessments and the individual's understanding of their own health and support needs. 
2. Intention: Was reducing or avoiding care and support charges a significant motivation for the transfer? Local authorities should consider all of the circumstances surrounding the disposal, including whether there were genuine alternative explanations for the transaction, such as family arrangements, estate planning, tax planning or other personal reasons. 

Only where the available evidence supports a finding of intentional deprivation can the local authority take the transferred assets into account as 'notional capital' when carrying out the financial assessment. The local authority may therefore assess the individual as though they still owned the transferred asset.

Where assets are treated as notional capital, the outcome of the assessment may affect not only the individual receiving care but also those who have received transferred assets. 

It is important to note that inheritance tax treatment does not determine the outcome of a deprivation of assets assessment. Assets that have been successfully transferred for inheritance tax purposes may still be taken into account for care charging purposes depending on the circumstances. 

Options for the local authority

Where a local authority concludes that a person has intentionally deprived themselves of assets to avoid care charges, a number of recovery options may be available. These options should be considered in accordance with the statutory framework and the particular circumstances of the case.

1. Time limits for recovery action: Recovery action should generally be pursued within six years of the debt becoming due. The local authority must also act reasonably when deciding how to recover sums owed and should take account of the individual's circumstances.
2. Deferred payment arrangements and alternative repayment solutions: Where a deferred payment arrangement or another reasonable repayment solution can be agreed, formal debt recovery proceedings may not be the most appropriate first step.
3. Recovery from the individual or recipient of transferred assets: Where appropriate, local authorities may seek recovery from the individual assessed as liable for the charges and, in certain circumstances, may also have powers to pursue recovery from a person who has received transferred assets. The availability of any recovery mechanism will depend on the relevant statutory provisions and the facts of the individual case.
4. Resolving matters through dialogue: Wherever possible, the local authority should seek to resolve matters through dialogue with the individual and their family, taking into account the specific circumstances involved, before court proceedings are contemplated. Individuals should be advised to obtain independent legal advice and, where appropriate, consideration should be given to their capacity to make decisions.
5. Formal debt recovery proceedings: If recovery cannot otherwise be achieved, the local authority may have recourse to formal debt recovery proceedings.

Summary

Local authorities have significant powers to investigate and address deliberate deprivation of assets in the context of care funding assessments. However, as individuals may challenge both the local authority's assessment and any subsequent recovery action, it remains important that local authorities act reasonably and maintain clear records of the steps taken when reaching and implementing their decisions.

The process of investigating deprivation of assets is often complex and fact-sensitive. Given the potentially substantial cost of long-term residential and nursing care, local authorities should ensure that they have robust procedures and clear policies in place to identify and pursue cases where intentional deprivation is suspected. Without a rigorous approach, the financial impact on local authority budgets can be significant.

If you would like further information on this subject, please contact us.