Deprivation of Assets and Care Fees: What UK Families Need to Know
When a parent or partner needs residential care, families often ask whether assets can be transferred to children to protect them from being spent on care fees. The answer is more nuanced than the popular advice suggests — councils have wide powers to look back, the seven-year inheritance tax rule does not apply, and getting it wrong can leave the giver with a bill they cannot pay. This guide explains, in plain English, how deprivation of assets is assessed in 2026, the lawful planning that does work, and the myths that get families into trouble.
How the means test works
When someone in England moves into residential care, the local authority assesses their capital and income. If capital is over the upper threshold (£23,250 in 2026, with the planned £100,000 cap repeatedly delayed), the resident pays in full. Between £14,250 and £23,250 they contribute on a tariff basis. Below £14,250 the council pays, with the resident contributing income only.
Capital includes savings, investments, second properties and — usually — the family home, unless a qualifying relative still lives there (a spouse, a relative over 60, a dependent child or a relative under 60 with a disability). The 12-week property disregard buys families breathing space at the start of a permanent stay.
What counts as deprivation
Deprivation of assets means deliberately reducing your assets — by gift, sale at undervalue, conversion into something disregarded, or simply spending — for the purpose of avoiding or reducing care fees. The Care and Support Statutory Guidance is explicit: the test is whether avoiding the charge was a significant motivation, not the only motivation.
Indicators councils look at include the timing of the gift relative to a deteriorating health condition, the size of the gift relative to the giver's lifestyle, whether the giver could reasonably have foreseen needing care, and whether the gift left the giver unable to meet their reasonable needs.
The seven-year myth
The seven-year rule is an inheritance tax concept and has no application to care fees. There is no time limit on how far back a council can look when investigating deprivation. A gift made fifteen years before entering care can, in principle, still be challenged if the council can show the giver could foresee needing care at the time of the gift.
In practice, gifts made many years before any health problem and clearly within normal lifestyle (helping a child onto the property ladder, paying for a wedding) are extremely unlikely to be challenged. Large gifts made shortly after a dementia diagnosis or hospital admission are at high risk.
What councils can do if they find deprivation
If a council decides assets have been deliberately deprived, it can treat the resident as still owning those assets ('notional capital') and refuse to fund their care until the assets are notionally spent down. The recipient of the gift may also become liable to repay the council under section 70 of the Care Act 2014.
Section 70 transfers the council's debt to the recipient — meaning the child who received a £150,000 house transfer can be pursued personally for unpaid care fees. Few families realise this risk when they accept the gift.
Lawful planning that does work
Spending money on the giver's own genuine needs and reasonable lifestyle (home improvements, holidays, a better car) is lawful and not deprivation. Setting up Lasting Powers of Attorney early ensures decisions can be made if capacity is lost. Equity release and immediate needs annuities can convert a house into care fee funding while preserving an inheritance.
Long-term planning while in good health — including life interest trusts in wills, mirror wills with severance of joint tenancy and considered use of allowances — can legitimately protect a share of assets for the surviving partner and children. The key is timing, motivation and proper legal advice from a STEP-qualified solicitor, not rushed transfers after a diagnosis.
Frequently asked questions
Can I gift my home to my children to avoid care fees?
It is risky. The council can treat the home as still yours, and your children become liable for fees under section 70. Take specialist legal advice before any major transfer.
What about putting the house in trust?
Trusts created while healthy and for genuine estate planning reasons can work. Trusts created after a diagnosis are routinely challenged as deprivation.
Does this apply in Scotland and Wales?
The principles are similar but thresholds differ. Scotland provides free personal care; Wales has a £50,000 capital limit. The deprivation rules apply in all four nations.