What happens if a service user gives away their assets, which the Local Authority has already taken into account to cover that person’s adult social care expenses, with the intention of avoiding paying for their own subsistence?
There is a predisposition in people to inherently worry about what happens to their loved ones when they sadly pass away. Not only is there the obvious concern for their physical wellbeing, there is also the concern that those being left behind will be financially well cared for.
Often people decide to gift away property whilst alive with the hope that the recipient of the gift can benefit sooner or with the hope that if they survive the period of 7 years from the date of that gift, they will not have to pay any Inheritance Tax.
Linked to all of the above is the question of being informed by a Local Authority that you are likely to have to pay for your care due to the size of your estate. What should a person do? Can they gift away their estate? What are the possible implications of doing so?
The expectation under the Care Act 2014 is that a resident in need of care service will have their needs assessed, a care package put together, their finances assessed and then be informed of the charge. It is well known that if you have capital assets of over £23,250.00, you will have to pay for the care services provided to you.
So what happens if someone gifts away those assets which the Local Authority has taken into account after they have been informed that they have to pay for their care? This is called intentional deprivation of assets.
Prior to the Care Act 2014, the relevant provision which provides a specific remedy is s.21 of the Health and Social Services and Social Security Adjudications Act 1983. Under this, the third party who have received the property are liable to pay the local authority the difference between the amount assessed to be paid by the service user and the amount that the local authority will now receive. There is no express limitation period for such a claim, albeit the care must have been provided before 2015. In order to be able to claim this remedy, you would have to show (i) a person moves into residential accommodation, (ii) they intend to avoid paying charges, and (iii) they transfer property at an undervalue or for no consideration. The transfer however must have taken place within 6 months of them moving into the care home.
Similarly, s.70 of the Care Act 2014 contains a comparable provision but it does not have the same 6-month limitation. This allows a local authority to recover the difference between what it would have charged had the transfer not taken place and what they have actually been able to charge as a result of the transfer.
Alternatively, Regulation 22 also allows a Local Authority to treat a service user as if they have that capital if they make a finding that someone has deprived themselves of it in order to avoid care fees. This is known as notional capital.
Recently the Local Government and Social Care Ombudsman (the LGSCO) has released a guide on their investigations into deprivation of capital. They say that they have about 40 complaints a year in this area, which they investigated in full, and have provided some general advice on how they treat them.
The LGSCO has confirmed that they look at Annex E of the Care and Support Statutory Guidance. They have identified that there are three main factors which a Local Authority should consider from this Annex:
- 1. “The council should consider if the user of services ‘must have known that they needed care and support’.” The LGSCO has confirmed that this is case specific.
- 2. “The person must have had a ‘reasonable expectation’ they may need to pay towards that care and support at the time of the deprivation.” This can just be general knowledge that they will have to pay towards their care.
- 3. “The council should consider the timing of the disposal of an asset. This can help inform a decision about the person’s motivation for disposing of the asset.”
The above means that even if someone was in receipt of care before they disposed of an asset, it will not be sufficient to show that they intended to deprive themselves of that asset. All of three factors above must also be considered in a council’s decision. The LGSCO suggests that a Local Authority should discuss the transfer with the service user or their representatives in order to understand the motivations for disposing of the asset at the time that the decision is being made.
Unlike, as mentioned above, with inheritance tax, which requires if a person wishes to not pay tax on a gift that they survive for 7 years, there is no such similar requirement for deprivation of assets. This means that a Local Authority can go back as far as they want to in order to gain an understanding of why an asset was gifted away.
It is clear that the LGSCO is requiring a local authority to have fully scrutinised any decision to treat someone as having made a transfer for deprivation of capital. That decision needs to be able to justify why it is a deprivation. For example, not all gifts are deprivations according to the LGSCO, so a ‘blanket approach’ should be avoided.
Proper records should be kept and the decision should be communicated to the service user or their family in writing. This communication should also explain how the decision can be challenged.
Overall, the decision to treat someone as having deprived themselves of capital should not be taken lightly. Having a clear record of the decision will only serve to strengthen the case if the service user of their family chooses to challenge the decision. It will only assist in recoveries of the fees at a later date if there is contemporaneous records of the service user’s motivations to the transfer. Given the vulnerability of these individuals, it may be that at the future time seeking such clarification is not possible.
A copy of the guidance can be found here : Ombudsman issues guidance on care finance decisions - Local Government and Social Care Ombudsman
Written by : Frances Boxall, Associate Solicitor
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