Deprivation of Assets for Residential Care Fees
If you deliberately deprive yourself of an asset then the Local Authority
can still take the asset into account in any assessment even if you no longer own or possess that asset.

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Deprivation of Assets for Residential Care Fees


If you deliberately deprive yourself of an asset then the Local Authority can still take the asset into account in any assessment even if you no longer own or possess that asset.

Deprivation of Assets

Deprivation of assets is an important concept to understand when considering how you can shield your assets from being claimed by the Local Authority.  If you deprive yourself of an asset then the Local Authority can treat the deprivation of that asset whereby the asset is still treated as belonging to you for the purposes of assessing your entitlement to care fees.

What is Deprivation?

Deprivation is where you take steps so that an asset previously owned or possessed by you is no longer in your ownership or possession.  The Local Authority will consider evidence about the deprivation and whether you in their reasonable opinion deliberately set about reducing the level of your assets to avoid paying for residential care.  Unless the Local Authority believes there was a valid reason for disposing of the assets (not related to residential care fees) then they have the legal right to assume that the disposal was a deliberate deprivation related to residential care fees.

Examples of Deliberate Disposal/Deprivation

The following are examples of deliberate deprivation:

  1. Making a lump sum gift or payment to someone else;
  2. A substantial expenditure has been incurred (e.g. an expensive holiday);
  3. Transferring ownership of a property to someone else;
  4. Money placed into a Trust that cannot be revoked;
  5. Converting assets to a disregarded form (e.g. personal possessions);
  6. Signs that capital has been reduced by living extravagantly.

Timescales of the Disposal/Deprivation of Assets

When considering the timescales for deprivation, there is no time limit that can be imposed.  However, as a general rule, the longer the time between the disposal of an asset and liability for residential care charges, the less likely it is that the disposal will be challenged.  It is arguably unreasonable for a Local Authority to challenge if you disposed of an asset in order to reduce care charges, if the disposal took place at a time when you were fit and healthy and could not have foreseen the need for a move to residential accommodation.


Have a valid reason – If you do dispose of or give away an asset, make sure that you record a valid reason (not related to avoiding residential care fees) for disposing of or giving away that asset.

Seek legal advice. Call us for a free no obligation initial telephone chat.

Significant Operative Purpose for Residential Care Fees


If you dispose of an asset for a genuine reason not in any way related to avoiding paying residential care fees then the Local Authority should not be able to take the disposal of that asset into account in any means assessment.

Test of Significant Operative Purpose

The test of significant operative purpose considers whether you deliberately set about disposing of assets, with or without the intent to avoid paying residential care charges.  Unless the Local Authority believed there was a valid reason for disposing of assets (not related to residential care fees) then they have the legal right to assume that the disposal was related to residential care fees.  The Local Authority can then treat the assets as still belonging to you as notional capital.

Factors That Must Be Taken Into Account

If you have disposed of assets, then you must make it clear if there were legitimate reasons for the disposal.  All relevant factors must be taken into account.  For example the reason for the disposal, the timing of the disposal, the state of your health and personal needs, as well as whether you could have reasonably foreseen any need to move into residential care.

Examples of Genuine Disposal/Deprivation

The following are examples of genuine disposal of an asset:

  1. Prepaying your funeral;
  2. Repaying outstanding debts or loans;
  3. Incurring reasonable expenditure on yourself (e.g. holidays, treats, etc.);
  4. Spending money for health care reasons, such as paying for a carer or buying equipment to assist with a disability;
  5. Spending money to supplement your lifestyle, for example if you needed money to help supplement a low pension;
  6. Making better provision for you and your family’s future such as Inheritance Tax planning.


Have a good valid reason – For disposing of the asset.  Ensure that if you do dispose of or give away an asset away that you have and record a valid reason (not related to avoiding residential care fees) for giving away that asset.

Seek legal advice – From ourselves or a solicitor that specialises in this area, and be able to assess and advise on whether this might be suitable for you.

Gifting to Preserve Assets for Residential Care Fees


Some people give away assets to family and friends in an attempt to reduce their own assets.  If you make a gift the Local Authority will argue that without a very good reason for making the gift, the assets forming that gift will still be treated as belonging to you and taken into account in any Local Authority assessment for residential care fees even if you no longer own or possess that asset.

Deliberate Deprivation

Gifting to family and friends is a strategy that some people use for preserving assets and keeping inheritance within a family.  The problem of gifting any assets is that it is often seen by the Local Authority as an act of deliberate deprivation.  This will then result in the Local Authority treating the gift as a notional asset that still belongs to you for the purposes of carrying out an assessment for residential care fees.

Other Risks of Gifting

Other issues that can arise if you decide to gift money is that you have the risk that the person you gifted the asset to becomes bankrupt, gets divorced, dies, falls out with you or disposes of the asset themselves.  If this happens, you could lose your assets completely or lose control over the money that you have gifted, potentially ending up worse off than if you had declared it.

Gifting Your Home

Much like gifting money, you can put yourself at risk if you gift your home to try and preserve this asset.  This used to be a popular strategy of disposing of a home but it is a strategy that no longer works, because the Local Authority will regard the gifting of the home as deprivation of an asset and will still treat it as a notional capital asset belonging to you.


Identify a valid reason for making the gift – Always think very carefully before making a gift and try to identify a valid reason for making the gift that the Local Authority might accept.

Seek legal advice. Please call us for a free no obligation telephone chat.

Gifts for Inheritance Tax Purposes – Residential Care Fees


Making gifts during your lifetime for Inheritance Tax purposes can be a useful way of reducing your assets without the Local Authority challenging them.

Inheritance Tax

Inheritance Tax is a tax payable on your estate after you die.  The tax is at a rate of 40% on all your estate assets over £325,000 (as at April 2018).  Fortunately, there are several ways to avoid or reduce paying Inheritance Tax.  You can use some of these ways to reorganise your assets to reduce paying Inheritance Tax which might also avoid paying residential care fees.

Lifetime Gifts for Inheritance Tax Purposes

It is possible to make a number of small gifts to your family, friends, charities and so on to reduce the value of your estate for residential care fees purposes.  These include:

  • Potentially exempt transfers – If you survive for seven years after making a gift to someone, the gift is generally exempt from Inheritance Tax, no matter what the value;
  • Annual allowance – It is possible for Inheritance tax purposes to make gifts up to a total of £3,000 in any year either as a single gift or several gifts adding up to that amount;
  • Small gifts – gifts of up to £250 per year to any one person;
  • Marriage gifts – gifts in consideration of marriage of up to £5,000 by any parent to their child or up to £2,500 by a relative of the married couple or up to £1,000 for any other non- related person;
  • Other gifts – gifts to charities or political parties or Housing Associations or for public benefit or historic buildings maintenance funds or employee trusts can also be made.

Seek Specialist Advice

This can be a complicated area and it is advisable to seek advice if you are thinking about gifting money or assets for inheritance tax purposes, to discuss whether any gifting could be seen as deprivation and hence counted as notional capital when being assessed by a Local Authority. 


Seek advice from a solicitor such as ourselves and an Independent Financial Adviser (“IFA”) that specialises in Inheritance Tax matters and is able to properly assess and advise you on whether this might be a suitable option for you.

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Residential Care Fees Protection Specialists

I’m Adrian Chambers and specialise in Residential Care Fees Protection matters. We aim to provide our clients with an outstanding legal service.

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