In England, you can give away money or property and make financial arrangements for your future. However, if you deliberately reduce your assets to avoid paying for care, the local authority can still take their value into account.
This is known as deprivation of assets.
What counts as deprivation of assets?
The local authority may investigate if you have deliberately reduced your savings, income or property to avoid paying care fees.
Examples include:
- Giving large sums of money to children or other family members.
- Transferring ownership of your home to someone else.
- Putting your home or savings into a trust to protect them from care fees.
- Selling property for less than its market value.
- Spending unusually large amounts of money to reduce your savings.
These arrangements are not automatically considered deprivation of assets. What matters is why you made them and your circumstances at the time.
Can I still give money to my family?
Yes. You are free to spend your money and make gifts to family and friends.
For example, giving birthday presents, helping a grandchild financially or spending money on holidays and home improvements would not automatically be considered deprivation of assets.
The council will consider whether avoiding care costs was a significant reason for the decision and whether you could reasonably have expected to need care at the time.
Is there a seven-year rule?
No. There is no seven-year rule for care fees.
The seven-year rule you may have heard about relates to inheritance tax, not local authority care funding.
A council can investigate gifts or transfers made many years earlier. However, it cannot simply assume that an old gift was made to avoid care fees. It must consider the circumstances and your intentions at the time.
What happens if the council decides I've deliberately given away assets?
The council can treat you as though you still own the money or property, even if you have already given it away.
This is called notional capital.
For example, suppose you give your daughter £50,000 specifically to avoid paying care home fees. The council may still include that £50,000 in your financial assessment.
This could mean you are expected to pay for care using money you no longer have.
In some circumstances, the council may also seek to recover care charges from the person who received the assets, up to the value of what they received.
What about putting my home into a trust?
A trust does not automatically protect your home from care fees.
If you transfer your property into a trust primarily to avoid paying for care, the council may treat the property as though you still own it.
Trusts can be useful for legitimate estate planning, but they can also involve legal costs, tax consequences and restrictions on how your property is used.
Be cautious of anyone promising that a trust will guarantee your home is protected from care fees.
Are there legitimate ways to protect my finances?
Yes. Understanding which assets are included in a care funding assessment is an important part of planning ahead.
For example:
- Your home: If you move permanently into a care home but your spouse or civil partner continues living in your home, its value must normally be excluded from your financial assessment.
- Care at home: If you receive care while continuing to live in your own home, its value is excluded from the assessment.
- Your partner's finances: If you are married or in a civil partnership, your partner's own savings and income are not automatically treated as yours.
- NHS Continuing Healthcare: If your assessed needs qualify, the NHS pays for your care package regardless of your savings or property.
These are established funding rules, not ways of hiding assets.
What should I do before giving away money or property?
If you are considering making substantial gifts, transferring property or setting up a trust:
- Think carefully about whether you may need the money for your own future care.
- Keep records explaining why you are making the gift or transfer.
- Seek advice from a solicitor experienced in later-life planning before making significant changes.
You can also ask your local authority how a proposed arrangement might affect a future care funding assessment.
The key point: You are entitled to enjoy your money and make reasonable financial decisions. However, deliberately giving away assets to avoid care fees can leave you financially vulnerable without reducing what you are assessed as having to pay.