Deprivation of Assets is not a commonly used expression, so if you are reading this blog, I am guessing it is quite likely that you are looking at helping a relative or perhaps yourself move into a care home.
Before a person goes into residential care, the local authority carries out a means test of their assets and income, in order to calculate whether they can afford to contribute some or all of the overall care costs.
Deprivation of assets is a term used to describe the process of reducing your assets to avoid them being included in the local authority means test; hence the reason you are probably wanting to understand more about it.
More than 130,000 people will need the services of a Care Home this year with more than 50% having to contribute towards or pay the full costs of care. When you consider the average stay in a care home is around 22 months and typically costs around £36,000 per annum, this could amount to a sizeable chunk of anyone’s assets. Of course that’s just based on averages; there are people who stay in residential care for much longer periods!
There are certain ways you can legally reduce your assets but local authorities have great powers to recover any assets they believe have been deliberately removed in order to avoid the assessment, so don’t immediately start giving your belongings away as it won’t necessarily help your cause.
There are companies out there who claim to “guarantee” that they can avoid your assets being included in the means test by setting up trusts or undertaking more elaborate schemes costing thousands of pounds but as this is something nobody can guarantee, take care and don’t take anything on face value.
At the end of the day timing and your motivation for ‘later life planning’, commonly known as “estate planning” are the crucial factors as to whether your assets are likely to be included.
For example, if you are 72 years old and suffering from ill health, it’s likely that any attempt to remove assets will be classed as an act of “deprivation”, as this will clearly look like a deliberate attempt to avoid paying care home fees.
On the other hand, if you are 56 years old and setting up a Will, trust funds and Inheritance Tax planning, it’s likely that all any assets you have legally “gifted” or placed in trust will be exempt from any means test, if you should need to move into a care home later down the line.
This fact sheet from Age UK all about Deprivation of Assets in the means test will help you understand more about the process and what is defined as unacceptable. If you are looking at putting plans in place for later life, talk to a trusted solicitor or speak to the team at Lifetime Legal.
Currently if your total assets exceed £23,250, you will be looking to at least contribute towards your care home fees. This of course is set to change with the introduction of government Care Bill in 2016 however details are still being agreed and are subject to change, so visit the GOV.UK website for the latest information.
One of the few allowable items of expenditure when it comes to deprivation of assets is a prepaid funeral plan which typically costs between £3,000 to £4,000. (I guess with death being the only certainty in life and a price we all have to pay, it’s something the local authority couldn’t really argue against).
In addition to helping lower your assets, a prepaid funeral plan could be a worthwhile investment considering the way funeral costs are continuing to rise way above the rate of inflation, so it may be something you want to consider for you or your relative.
With all this talk of having to use your hard earned savings to pay for care home fees, it’s little wonder that the national press continue to write articles about whether those who save throughout their lives are being penalised for doing so.
Is it better to end up with nothing so there is nothing to take?
I have to say it does make you wonder; what do you think?