Earlier Made Gifts
Gifts Made Before Entering Care
One of the most complex areas of the care home charging rules concerns gifts made to family or friends before a person moves into care. The Health and Social Care (HSC) Trust has the power to investigate these gifts to determine if they were made with the intention of avoiding care home fees. This is known as deprivation of capital.
What is Deprivation of Capital?
The Charging for Residential Accommodation Guide (CRAG) 2015 [1] states that if a person has deliberately disposed of an asset in order to reduce the amount they have to pay for their care, the Trust can treat them as if they still own that asset. This is referred to as notional capital.
"If the Trust is satisfied that a resident has deprived himself of capital in order to reduce his accommodation charge, the capital of which he has deprived himself should be treated as part of his capital." - CRAG 2015, 6.056
This means that even though the asset has been given away, its value can still be included in the financial ## The Purpose and Timing of the Gift 217 218 When deciding if deprivation has occurred, the HSC Trust will consider two key questions: 219 220 1. Purpose: Was a significant reason for making the gift to avoid care home charges? The Trust must be able to demonstrate that the purpose of the gift was to avoid charges. For example, if a person was in poor health and knew that they were likely to need care in the near future, a large gift made at that time would be likely to be considered deprivation. 221 222 2. Timing: There is no set time limit on how far back the Trust can look at a person's financial affairs. However, the timing of the gift is a crucial factor. A gift made many years before a person needs care is less likely to be considered deprivation than one made shortly before they move into a care home. 223 224 ## Debunking the "Seven-Year Myth" 225 226 There is a widespread misconception that if you give away assets more than seven years before entering care, the Trust cannot touch them. This is incorrect. 227 228 The "seven-year rule" applies specifically to Inheritance Tax, not to care home fees. For care home assessments, there is no statutory time limit on how far back the Trust can investigate. 229 230 ### The Practical Reality: A One-Year Look-Back? 231 232 While the Trust can look back indefinitely, recent litigation and case law suggest a more practical approach. The courts have indicated that if a gift was made when the person was in good health and had no reasonable expectation of needing long-term care, it is difficult for the Trust to prove that the purpose was to avoid fees. 233 234 In practice, this often means that gifts made more than approximately one year before entering care are less likely to be successfully challenged, provided there is no evidence that the donor anticipated needing care at the time. However, every case is assessed on its own merits, and if there is clear evidence of an intent to avoid fees, the Trust can challenge gifts made much earlier.cided?
If the Trust decides that deprivation of capital has occurred, the value of the gifted asset will be added to the resident's capital as notional capital. This will increase the amount they are assessed as being able to contribute to their care fees.
Diminishing Notional Capital
Once the notional capital has been included in the assessment, it is considered to have been "spent" over time. The CRAG guidance provides for the notional capital to be reduced by the amount the resident is assessed as contributing towards their care. This is known as diminishing notional capital. This ensures that the resident is not indefinitely assessed on capital that they no longer have.
Common Scenarios
| Scenario | Is it likely to be deprivation? |
|---|---|
| Regular small gifts | Small gifts made for birthdays or Christmas are unlikely to be considered deprivation. |
| Large lump sum gift | A large one-off gift, especially if made when the person is unwell, is more likely to be investigated. |
| Transferring property | Transferring ownership of a property to a family member for less than its market value is a common example of what the Trust may consider to be deprivation. |
If you are considering making a significant gift, it is always wise to seek legal advice on the potential implications for future care home fees.
References
[1] Department of Health, Social Services and Public Safety. (2015). Charging for Residential Accommodation Guide (CRAG) 2015. https://www.health-ni.gov.uk/publications/guidance-charging-residential-accommodation