There is a quiet temptation many people face when thinking about the future. If care fees are looming, or inheritance tax is a concern, the idea of giving assets away early can feel like a sensible step.
In this piece, Kevin Martin from our Wills and Probate team explains what deprivation of assets really means, how it is assessed in England and Wales and why careful planning matters. Kevin advises individuals and families across the West Midlands where he supports clients with estate planning, wills and long-term care considerations, helping them make informed decisions with clarity.
What is Deprivation of Assets?
From my experience, deprivation of assets is one of the most misunderstood areas of estate planning. At its core, it refers to situations where someone deliberately reduces the value of their assets, whether that is money, property or investments, in order to gain a financial advantage. This might be to qualify for means-tested benefits, to reduce or avoid care home fees or to minimise a potential inheritance tax liability.
On the surface, some of these decisions can appear reasonable. Families often want to pass wealth down or protect assets for the next generation. However, the key issue is not simply what was done, but why it was done. That is where scrutiny begins.
Guidance from organisations such as Independent Age and Age UK explains how local authorities assess whether assets have been deliberately given away. Their advice makes clear that intention plays a central role.
How do Local Authorities Assess Deprivation of Assets?
When assessing deprivation of assets, local authorities and bodies such as HMRC will consider several key factors. One of the most important is foreseeability. In simple terms, could you reasonably have expected that you might need care soon at the time the asset was transferred.
Timing is also critical. A decision made later in life, particularly when health is declining, is far more likely to be questioned than one made earlier when there were no immediate concerns.
Motivation is equally important. If avoiding care fees or reducing liability was a significant reason for the transfer, this may lead to a finding of deliberate deprivation. In those circumstances, the authority may treat you as still owning the asset, often referred to as “notional capital”. This can result in funding being refused or, in some cases, costs being recovered from the person who received the asset.
Recent reporting by the BBC News highlights in the story ‘Putting our home in a trust was a legal nightmare’ how increasingly complex care funding decisions have become, reinforcing the importance of understanding how these rules are applied in practice.
Examples of Deprivation of Assets
I am often asked what types of actions might be considered deprivation. Common examples include gifting large sums of money to family members, transferring ownership of a property, selling assets for less than their market value or deliberately reducing savings through excessive spending.
Each case is assessed on its own facts. For example, transferring a property at a younger age when you are in good health may be viewed very differently from doing so later in life following a serious health diagnosis.
Gifting vs Deprivation of Assets: Understanding the Difference
It is important to recognise that not all gifts are treated as deprivation of assets. Regular and reasonable gifting, such as birthday or seasonal gifts, is usually acceptable.
There is also often confusion with inheritance tax rules, particularly the seven-year rule for gifts. While this rule may apply for inheritance tax purposes, it does not prevent a local authority from investigating deprivation of assets. There is no fixed time limit when it comes to assessing intent for care fee purposes.
What Are the Risks of Deprivation of Assets?
The consequences of getting this wrong can be significant. You may still be required to pay care fees in full, despite having transferred assets. Disputes with local authorities can become complex and time-consuming. There may also be financial implications for family members who have received assets, particularly if recovery action is taken.
Estate Planning Tips to Avoid Deprivation of Assets Issues
A more effective approach is to plan early and carefully. Keeping clear records of gifts, including the reasons for making them, can be important. Considering appropriate estate planning tools, such as wills or trusts, may also help, but these should always be approached with professional advice.
At NBB Waldrons, our Wills and Probate team works closely with clients to ensure their plans are both practical and compliant. The focus is on achieving long-term stability, rather than short-term fixes.
Kevin’s Perspective on Deprivation of Assets
As I often explain to clients, deprivation of assets is not unlawful in itself. However, if a local authority believes that steps have been taken deliberately to gain a financial advantage, they are entitled to assess you as though those assets still belong to you.
“When it comes to planning for care and protecting your estate, timing and intention are everything. Taking advice early allows you to make informed decisions that stand up to scrutiny and genuinely support your long-term plans.”
Speak to a Solicitor About Deprivation of Assets
If you are considering gifting assets or want to understand how deprivation of assets rules may affect you, it is important to take advice early.
I would be happy to discuss your circumstances and help you explore estate planning options that are clear, compliant and aligned.
