Council challenging gifts to avoid care fees

This is a very important area and one where councils have significant powers. Here is the legal and practical position.

The legal framework:

Local authorities in England can investigate and in some cases effectively reverse or disregard gifts of assets where a person has deliberately deprived themselves of capital or income in order to reduce or avoid liability for care home fees. The main provisions are found in the Care Act 2014, specifically sections 14, 17, and 70, and the Care and Support (Charging and Assessment of Resources) Regulations 2014. The detailed guidance is set out in Annex E of the Care and Support Statutory Guidance issued under the Care Act.

Deprivation of assets:

The key concept is "deprivation of assets." A local authority can treat a person as still possessing an asset they have given away if it is satisfied that the person disposed of the asset in order to reduce their liability for care costs. This is often called "notional capital."

The council does not need to prove that avoiding care fees was the sole purpose of the gift. It only needs to be a significant purpose. This is a factual question in each case and the council will look at the timing of the gift, the person's health at the time, whether they had reason to anticipate needing care, and whether there was any other reasonable explanation for the transfer.

Timing matters enormously:

There is no fixed time limit or safe period after which a gift becomes immune from challenge. This is a common misconception. Unlike inheritance tax, where the seven-year rule applies, there is no equivalent in care funding law. A gift made twenty years ago when the person was in good health is much less likely to be treated as deprivation than one made two years ago when the person had been diagnosed with dementia, but neither is automatically safe or automatically caught.

What the council can do:

1. Treat the person as if they still own the asset (notional capital), meaning the person is assessed as a self-funder and charged the full cost of care even though they no longer hold the asset.

2. Under section 70 of the Care Act 2014, if the person who received the gift knew or ought to have known that the purpose was to avoid care charges, the council can pursue that person directly to recover the assessed charges. This is an important and sometimes overlooked power. The liability of the recipient is capped at the value of the asset they received.

3. The council can also consider whether the transfer was at an undervalue, for example selling a property to a family member for well below market value.

Common scenarios that attract scrutiny:

Transferring the family home to adult children while continuing to live in it. Giving away large sums of money, particularly after a diagnosis or a decline in health. Placing assets into trust for family members. Making gifts shortly after being told about a care needs assessment.

Defences and arguments:

The person may argue that the gift was made for entirely different reasons, such as to help a child buy a home, as part of long-standing tax planning, or simply because they wanted to be generous while alive. The strength of these arguments depends heavily on the factual circumstances, particularly the timing, the person's health, and any contemporaneous evidence of the reason for the gift.

Challenging a council decision:

If a council decides to apply notional capital, the person or their family can challenge this through the local authority's own complaints procedure, then through the Local Government and Social Care Ombudsman. In appropriate cases, judicial review may also be available, although this is a more costly and demanding route.

Practical considerations:

If someone is thinking about making gifts with the aim of protecting assets from care fees, they should be aware that this strategy carries real risks. Councils are experienced in identifying these arrangements and they do investigate. The person making the gift also loses control of the asset, which creates its own risks if the recipient's circumstances change, for example through divorce, bankruptcy, or a falling out.

If a council has already raised this issue, the most important thing is to gather evidence about the reasons for the gift and the circumstances at the time it was made. Contemporaneous documents such as letters, financial advice records, or medical records showing the person's state of health can be very helpful.

If you can tell me more about the specific situation, such as what was given, when, and the person's health at the time, I can give you a more tailored view of the likely strength of any council challenge and the best way to respond.