Property trusts, deprivation of capital and notional capital

If an individual makes a gift or other transfer of value it does not mean that the asset will always be ignored in an assessment of the donor's financial resources for care costs.

The Local Authority (LA) considers, on assessment, whether an individual intentionally or deliberately removed any assets to avoid paying for their care. If an LA considers a transfer of an asset to be a deliberate deprivation, it includes a notional assessment of the assets (notional capital) in the assessment of the individual's financial resources. Deliberate deprivation may include:

  • Making financial gifts to friends and family.
  • Putting cash into trust.
  • Transferring the registered title of a property to another individual.
  • Sudden uncharacteristic spending patterns (such as, extravagant living).
  • Paying off someone else's debts.
  • Converting assets into otherwise disregarded assets (for example, buying an expensive painting from savings in a bank account).
  • Selling assets at an undervalue.

The LA must show without doubt that there was an intention to deprive before it can take the capital into account. Before deciding that deliberate deprivation has occurred, the LA  must consider the following:

  • Was the avoidance of care charges a significant motivation? – If a trust is in place for a property it will clearly state within it the reasons for setting up the trust which removes any ambiguity or doubt in this regard.
  • At the time of the disposal, did the individual have a reasonable expectation that he would need care and support from the LA (for example, was he fit and healthy)? – If a declaration is signed to this effect at the time of setting up the trust this also  removes any ambiguity or doubt in this regard.
  • Did the individual have a reasonable expectation that he would be assessed as having to contribute towards the cost of those care needs? – if the trust was set up well in advance of any care considerations then this is a moot point

On 1 February 2018, the Local Government & Social Care Ombudsman upheld a complaint against North Yorkshire County Council's decision to treat a care home resident's gifts of money to family as a deprivation of assets because the LA had not provided sufficient evidence to show how it considered the gifts were made with the intention of avoiding care charges. The LA was ordered to apologise to the care home resident and reassess her ability to pay for her care.

So remember folks – so long as you have evidence to show that placing your home into trust is for valid reasons such as:

  • Avoiding probate fees
  • Protecting your home being lost to a future spouse if you die and your partner remarries and dies before their new spouse
  • Preventing you children losing some or all of their inheritance in the future through divorce or bankruptcy

Your property will be secure for those that you love in the future