Deprivation of Assets UK (2026): Care Home Fees, Gifting Property and the Local Authority Rules

Deprivation of assets occurs when a person deliberately reduces their assets — through giving them away, selling them at an undervalue, or spending them in a way that is calculated to reduce the amount they pay towards care — with the intention of avoiding or reducing care home fees. The relevant law in England is the Care Act 2014 and the Care and Support (Charging and Assessment of Resources) Regulations 2014, together with the statutory Care and Support Statutory Guidance (the CASS Guidance). Key points: (1) THE TWO QUESTIONS THE LOCAL AUTHORITY ASKS: (a) Was the main purpose or a significant purpose of the disposal to avoid or reduce care charges? The 'significant purpose' test is deliberately broad — the local authority does not have to prove that avoiding care costs was the ONLY reason; (b) Did the person have a sufficiently foreseeable need for care and support at the time of the disposal? There is no fixed lookback period in statute — the council can in principle look back as far as the asset disposal. However, the CASS Guidance says councils should consider whether it was reasonable to expect that care costs would be a factor at the time of the transaction. Someone who gives away their house at age 40 when healthy is in a very different position from someone who transfers it at age 79 while on a waiting list for a care home; (2) THE BURDEN OF PROOF: the burden lies with the local authority to establish deprivation. The person (or their representative) can challenge the finding. Common defences include: the gift was made for genuine family/emotional reasons; the gift was made when care costs were not foreseeable; the gift was made to a spouse (see below); the asset has diminished in value since disposal; (3) COUNCIL VARIATION: different local authorities apply the rule with different levels of scrutiny. Some are aggressive (checking Land Registry records going back decades); others are more pragmatic. The statutory guidance is guidance only — councils have discretion; (4) THE CARE THRESHOLD: as of 2026, local authority means testing starts when assets fall below £23,250 (the upper capital threshold — below which partial local authority funding begins) and full local authority funding is available below the lower threshold of £14,250. These thresholds exclude the main home in most circumstances but include savings, investments, second properties, and certain other assets.

The Care and Support Statutory Guidance (Chapter 8) sets out examples of what may constitute deprivation. These are not exhaustive: (1) GIVING AWAY PROPERTY: transferring your home or other property to a child, family member, or friend at a time when care costs are foreseeable. This is the most common and most scrutinised form of deprivation; (2) GIFTING MONEY: large cash gifts to family members — particularly when made shortly before entering care, or while already in care; (3) SELLING ASSETS AT AN UNDERVALUE: selling a property or investment at significantly below market value. The local authority would treat the difference between market value and sale price as a retained asset (notional capital); (4) SPENDING DOWN ASSETS ON NON-NECESSARY ITEMS: using capital on luxury holidays, home improvements for a property you are about to leave permanently, or other expenditure that appears designed to reduce the assessable estate rather than for genuine personal benefit; (5) PUTTING ASSETS IN TRUST: placing assets into a trust (whether a bare trust, discretionary trust, or life interest trust) specifically to take them outside means testing. The creation of a trust will be closely scrutinised if done when care was foreseeable. Note: some trusts for legitimate purposes (disabled persons trusts, IPDI trusts on the death of a spouse) are treated differently under the means-testing rules; (6) WHAT DOES NOT COUNT AS DEPRIVATION: (a) Spending that was reasonable and not primarily aimed at avoiding care costs — e.g., genuine home maintenance, normal holidays, repayment of debts, normal gifts at Christmas/birthdays; (b) Gifts made when there was no foreseeable need for care — many years before any health event; (c) Transfers between spouses/civil partners — the local authority cannot count a spouse as having deprived themselves simply because their jointly owned home passed to the surviving spouse on death; (d) Giving away assets to meet a genuine legal obligation (e.g., repaying a loan to a family member that was properly documented and existed before the care need arose); (e) Assets spent on normal living costs and personal expenditure; (7) PROPERTY PROTECTION TRUSTS: a Trust will not circumvent the means-testing rules if the council can show the primary purpose was to avoid care costs. The CASS Guidance specifically warns against the marketing of 'asset protection trusts' for this purpose.

If the local authority concludes that deprivation has occurred, it applies the notional capital and notional income rules: (1) NOTIONAL CAPITAL (CARE AND SUPPORT REGULATIONS REG. 22): the person is treated as still owning the assets they disposed of. The notional value is the open-market value of the asset at the time of disposal. For a property, this would be its value at the date of the transfer (not the current market value). The local authority adds the notional capital to any actual remaining capital and assesses the person's contribution to care costs on that combined figure; (2) THE PERSON STILL HAS TO PAY: in practical terms, this means the local authority may: (a) Decline to fund any care costs at all, because the notional total puts the person above the upper capital threshold; or (b) Require the person to pay more towards their care than they would otherwise pay; (3) DIMINISHING NOTIONAL CAPITAL: the notional capital reduces over time. Each week that passes, the notional capital is reduced by the amount the person would have paid in care contributions from that capital had they actually retained it. This eventually brings the notional capital down to the point where full funding kicks in; (4) RECOVERY FROM THE RECIPIENT: if the person genuinely cannot pay (their actual assets are exhausted), the local authority CAN in some circumstances recover the care costs from the person who received the gifted asset. This is done under Care Act 2014 s.70 (liability of third parties in certain circumstances). This power is limited but it does exist — and family members who receive property transfers should be aware of the risk; (5) CHALLENGING A DEPRIVATION FINDING: the person (or their attorney/deputy/family member) has the right to challenge the finding. Begin with a formal complaint to the local authority. If unresolved, escalate to the Local Government and Social Care Ombudsman (LGSCO). The Ombudsman can direct the council to reassess. Legal challenge via judicial review is available but expensive.

Transferring your home to your children is the most common and most scrutinised transaction in deprivation of assets cases. The short answer: it DEPENDS on timing, intent, and circumstances. (1) IF DONE MANY YEARS BEFORE ANY FORESEEABLE CARE NEED: a transfer to children at age 50–60, when the person is healthy and there is no foreseeable care need, is much harder for the local authority to challenge as deprivation. The longer the gap between transfer and care need, the weaker the deprivation argument. There is no statutory lookback period — but the CASS Guidance effectively means that transfers more than 10–15 years before care are rarely challenged; (2) IF DONE WHEN CARE IS ALREADY FORESEEN: a transfer made at age 75+ when health is declining, or made in response to a GP referral or following a hospital admission, is highly likely to be treated as deprivation — particularly if the main stated reason is 'to protect the house from care fees'; (3) TRANSFERRING SUBJECT TO A RIGHT OF OCCUPATION: some people transfer their home to children while retaining a contractual right to live there for life. This does NOT necessarily prevent deprivation of assets challenge. However, it creates a 'beneficial interest' (the right to occupy has a value) that must be taken into account. The local authority must assess the value of the right to occupy — which is a complex actuarial calculation. In practice, many local authorities struggle to value and pursue this; (4) WHAT YOU SHOULD KNOW ABOUT 'ASSET PROTECTION TRUSTS': firms market 'asset protection trust' services promising to ring-fence your home from care costs. These trusts DO NOT reliably achieve this. If the council decides the trust was created to avoid care costs, it can treat the trust assets as notional capital — regardless of the trust structure; (5) JOINT PROPERTY — SURVIVORSHIP: a property held as joint tenants passes to the surviving co-owner by survivorship on death — this is NOT deprivation of assets. It is the normal operation of joint tenancy law. The surviving owner then owns the full property, which may be assessable under means testing if they later need care; (6) FOR IHT PURPOSES: note that transferring property to children is treated very differently for IHT than for care means testing. For IHT, it is a potentially exempt transfer (7-year rule). For care means testing, the timing of foreseeable care need is what matters — not a fixed 7-year clock.

In the vast majority of cases, no — and attempts to use trusts to protect the home from care fees are actively warned against in the CASS Guidance: (1) THE FUNDAMENTAL PROBLEM: if the local authority decides that the primary or a significant purpose of putting your home into a trust was to avoid care costs, it will treat the trust assets as notional capital. The trust wrapper is irrelevant to the means-testing question. The question is not 'does a trust own the asset?' but 'why was the trust created?'; (2) ASSET PROTECTION TRUSTS ARE MARKETED AGGRESSIVELY: firms (often unregulated will writers and financial advisers) sell 'family protection trusts', 'home protection trusts', and 'asset protection trusts' with the explicit promise of sheltering the home from care fees. These products typically involve transferring the property into a discretionary trust of which the settlors (original owners) are beneficiaries. This structure does not achieve its purpose if the local authority decides deprivation occurred; (3) WHEN TRUSTS DO PROPERLY SHELTER ASSETS: (a) A disabled person's trust or a trust for a vulnerable beneficiary (under s.89 IHTA 1984) created for legitimate welfare reasons — not care avoidance; (b) A life interest trust (IPDI) created on the DEATH of the first spouse/civil partner — the local authority considers the surviving spouse's own assets, not those in the trust (though the surviving spouse's income from the trust is assessable); (c) A trust established many years before any foreseeable care need, for genuine estate planning or family reasons — where the council cannot establish that care avoidance was a significant purpose at the time; (4) COMPLAIN TO THE LGSCO: if you believe the local authority has wrongly treated trust assets as notional capital, raise a formal complaint and, if needed, an LGSCO complaint; (5) PROPER PLANNING THAT DOES WORK: the most reliably effective ways to legitimately limit care costs are: (a) Make your home your spouse's primary residence (the family home is disregarded while a qualifying person occupies it as their main home under Care and Support Regulations para. 18); (b) Plan well in advance — years before any foreseeable care need; (c) Use assets to fund genuine expenditure — home adaptations, quality of life improvements — rather than gifting them away.