A Complete guide to deprivation of assets

What Is Deprivation Of Assets?

Deprivation of assets is when someone intentionally decreases the assets (things) they own in order to reduce the amount of money they pay towards the cost of their social care, meaning the local council pays more of it leaving them to give more of their money away to family.
Some examples of deprivation of assets include; a lump sum of money being paid to someone, the deeds to a property/assets being changed or a substantial change in expenditure that is out of character.

Deprivation of assets & Funeral Plans

Does a funeral plan count as a deprivation of assets? The answer is it depends. There are recent cases where the Financial Ombudsman has ruled that the purchase of a funeral plan is a deprivation of assets, but there are also other circumstances in which it has been overlooked. 

There are no concrete rules on what spending, purchases, or other financial activities are acceptable ahead of going into care without it being considered a deprivation of assets. 

Ultimately, the test is one of reasonableness – is the spending reasonable in the opinion of the decision maker reviewing your assets?  

To decide whether or not spending is reasonable, decision-makers rely on looking at the intention of the person. 

If a funeral plan has been purchased with the intention of bringing your total assets below the threshold for social care funding then the purchase will be considered a deprivation of assets. 
This is because a funeral plan is not something that you must pay for in full. The majority of plans available offer the option of flexible monthly payments which would not reduce your assets as drastically as paying in full.

Is a funeral plan classed as an asset?

Funeral plans are often considered to be services rather than assets. We have reviewed the current legislation and there is unfortunately no mention of whether a decision maker within a local authority should or should not consider funeral plans an asset. 

This means that it is up to the decision-maker to take a view, which has led to inconsistent decisions across the country. In a recent case Hertfordshire County Council argued that as a funeral plan can at any time be cancelled, triggering the return of funds to the plan holder, they should not be disregarded when considering total assets.  
We would suggest contacting your local Welfare Rights Organisation for specific advice on this point.

Does a funeral plan count as savings?

Although the Financial Conduct Authority will be assuming regulation of all funeral plan providers from 29 July 2022, these plans are not considered savings within the current law. Indeed, they can be a tax-efficient purchase if the funds are available as the value of a plan does not count towards the value of your Estate after you have passed away.

Deliberate deprivation of assets

Some common examples of deliberate deprivation of assets include: 

• Making a lump sum gift to a third party.
• High or out-of-character levels of spending, including gambling. 
• Transferring property you own to a third party. 
• Setting up a trust and transferring assets into this. 
• Converting liquid assets into other types that are not considered such as purchasing more physical possessions.

Is obtaining a Power of Attorney deprivation of assets?

Paying the fees associated with putting a Power of Attorney in place would be considered paying for a service, rather than an asset, and would not be considered a deprivation of assets. 

However, if you give power of attorney to another person and they then begin disposing of your assets with the intention of avoiding social care costs then a local authority would consider this deliberate deprivation of assets.

Deprivation of assets 6 month rule / 7 year rule?

How far back can the deprivation of assets go? Unfortunately, there is no ‘6-month rule’ or ‘7-year rule’ for the deprivation of assets.

A local authority can go back as far as they wish to when investigating whether there has been a deprivation of assets.

Deprivation of Assets: FAQs

Does a funeral plan count as a deprivation of assets?

A funeral plan generally only counts as deprivation of assets if it can be reasonably assumed that the plan was purchased with the intention of obtaining local authority support for social care costs. 

The law is not clear on this point and local authorities are taking differing views on this issue. It is important to take advice from your Welfare Rights Organisation ahead of purchasing a funeral plan if you anticipate requiring residential care in the near future.

How do you prove the deprivation of assets?

Deprivation of assets is assessed on two things: 

1. Intention 

Your intention to avoid your care charges must be a significant reason, or the only one, for disposing of that asset, in order for a local authority to conclude that you have deprived yourself of it. 

2. Foreseeability 

For deprivation of assets to be proved it must be evidenced that you could have reasonably foreseen when disposing of an asset that you would need social care in the near future. If you were fit and healthy when disposing of the asset then this cannot be evidenced.

What is not considered a deprivation of assets?

As deprivation of assets centers around the intention, it is not possible to prove that you intentionally deprived yourself of assets if at the time you were fit and healthy and would not have reasonably expected that you would require social care.

Can you challenge the decision of a Local Authority?

When making their decision, your local authority must use its discretion and ensure it takes all key facts and justifications into account. 

The decision maker must explain their decision to you clearly. You can challenge the decision if you disagree with it.
Firstly a decision can be challenged internally using the authority’s formal complaints procedure. If you remain dissatisfied with the outcome, the matter can be referred to the Local Government and Social Care Ombudsman.