Deliberate Deprivation of Assets: Should You Be Worried?
You may have heard of “deliberate deprivation” in relation to the way that local authorities calculate means-tested social care and support costs. It’s often talked about, but perhaps less well known than other issues when it comes to social care.
But it’s important to understand what deliberate deprivation means and whether it’s something you need to worry about. Unfortunately, people can get into trouble with this if they don’t understand the rules – and it can have serious financial implications.
So, here’s our guide on what deliberate deprivation of assets is, how it might happen, and whether you need to worry about it.
What is deliberate deprivation?
Deliberate deprivation of assets refers to a scenario where a person purposefully gives away things they own in order to pay less on a means tested cost, such as care or support. This could mean assets like property, cash or even personal possessions – especially if they’re sold for far under market value.
Because care costs are means tested, if you give away assets, it follows that you’ll therefore be eligible to pay less for your care. However, if the local authority can determine that you’ve given away your income or property for the sole purpose of reducing the amount you pay for care, they can essentially assess your financial circumstances as if you hadn’t given the assets away at all – charging you what you would have originally paid.
This could therefore lead to you having to pay more than you can afford for your care, because you’ve given away your income.
One of the key issues with deliberate deprivation is that it’s difficult to predict the action that local authorities may take. Financial assessments for means-tested care costs can be complicated, and local authorities may investigate any financial transactions or discrepancies they deem to potentially be deliberate deprivation.
What could be considered as deliberate deprivation?
There are a number of different things that are set out in the guidance for local authorities as possible deliberate deprivation and therefore these could be investigated. Here are some examples (note that this is a non-exhaustive list as part of the danger of deliberate deprivation is that it covers a wide range of losses of income):
- A lump-sum cash payment to somebody else, even a family member
- Any substantial spending that’s out of character
- Transferring a property to another person
- Suddenly living extravagantly, spending frivolously on, for example, gambling.
Can deliberate deprivation happen accidentally?
One of the key things about deliberate deprivation is that it has to be proven to be deliberate. So, in theory, you can’t accidentally commit deliberate deprivation.
However, in practice, because deliberate deprivation covers a wide range of potential transactions, it’s possible that you could end up being investigated by a local authority. This means it’s vital to be cautious and careful when it comes to making changes to your finances if you know you’re likely to need care or support services in the near future.
Another part of the deliberate deprivation rules is around foreseeability – this means that if you suddenly need care or support unexpectedly, it’s unlikely to be considered deliberate deprivation. So, if you’re fit and healthy with no immediate need for care, you shouldn’t have to worry too much about ensuring your financial situation and recent transactions being considered as a strategy for deliberate deprivation.
What are the risks?
The way that deliberate deprivation is handled by local authorities is to simply charge you for your care needs as if you still had the assets or income. So, the obvious risk is that you might end up paying an unaffordable amount for your care. For example, if you bought cars for your children to try and reduce your savings and pay less for your care, you may end up simply being charged what you would have been charged had you not bought the cars!
There are other risks, too. If you can’t afford the new rates, the local authority can recover the charges from a third party. In the example above, this may mean that your children are liable to pay for your care, because you bought them new cars and therefore transferred your assets to them.
Is deliberate deprivation a good strategy?
Simply put, no. If you know you’re going into care, it’s absolutely vital to be careful with your finances. Not only can you end up in legal trouble with local authorities if they can prove that you’re deliberately reducing or spending your income to try and avoid paying for your care, going into care is an unavoidable long-term financial commitment that you need to plan for in a serious and thoughtful way.
If you need help with your finances, check out Face to Face Finance’s range of financial advice services. Whether you want to plan your pensions, retirement or inheritance, we can help make the right choices for you – and we always get to know your exact situation, so we can offer the perfect advice. Get in touch with us today.