Many families worry about how care home fees will be paid and whether it is possible to protect assets such as the family home or savings. A common misconception is that giving away assets or placing them into trust will automatically prevent those assets being counted by the local authority. In reality, this can create serious legal and financial problems.

What is “deprivation of assets”?

Deprivation of assets occurs where a person deliberately reduces the value of their money, property or income so that they pay less towards care costs. This can include:

• Gifting money to children or other relatives
• Transferring a property into someone else’s name
• Selling assets for less than their true value
• Placing property or savings into a trust

If the local authority believes this was done to avoid care fees, it can challenge the transaction and treat the person as if they still own the asset.

Is there a “seven‑year rule” for care fees?

No. Unlike inheritance tax, there is no fixed time limit after which gifts or transfers are automatically ignored. Local authorities can look back as far as they consider relevant. The key issue is not how long ago the transfer was made, but why it was made.

What will the local authority look at?

When deciding whether deprivation has taken place, the local authority will consider:

1. Whether care needs were foreseeable at the time of the transfer
2. The timing of the disposal (for example, shortly before entering care)
3. Whether avoiding care fees was a significant motivation

If assets were disposed of when a person was fit, healthy and could not reasonably have anticipated needing care, this may support an argument that there was no deliberate deprivation.

Can trusts protect a property from care fees?

Placing a property into trust does not guarantee protection from care fees. If the local authority decides the trust was set up to avoid care costs:

• It may ignore the trust and treat the value of the property as notional capital
• It can refuse to fund care or take steps to recover costs
• In some cases, it can pursue those who received the assets for repayment

Even where a trust was created more than six months before the individual applied for funding, the local authority may still challenge it if deprivation is established.

What are the consequences of getting it wrong?

If deprivation is found, the local authority may:

• Assess care fees as if the assets were still owned
• Decline to provide financial assistance
• Recover care fees from the recipient of the transferred asset

This can leave families exposed to unexpected care costs and disputes at a very stressful time.

Practical advice

Asset planning for later life should always be approached carefully and with proper legal advice. There are legitimate ways to plan ahead for care, but arrangements designed solely to avoid care fees are likely to be challenged.

If you are considering gifting assets, setting up a trust, or responding to a local authority decision, specialist advice at an early stage can make a significant difference.

Our contentious probate and trust team regularly advises where arrangements are challenged. If you have received a notice from the local authority questioning or disputing a transaction, we recommend getting in touch promptly.

If you would like to discuss care fee planning or are facing a local authority challenge, our private client team would be happy to help.