If you have ever heard that giving your house to your children will stop it being used to pay for care, be careful. It is one of the most persistent pieces of misinformation in later-life planning, and acting on it can leave a family paying more for care, not less, once a council investigates.
This guide explains what “deprivation of assets” means, how councils actually test for it, the current means-test thresholds, and the legitimate ways to plan – including the 12-week property disregard and deferred payment agreements. If you are choosing someone to manage your finances if you lose capacity, our guide to lasting power of attorney covers that separate decision. For the inheritance tax side of gifting, see our guide to inheritance tax gift rules.
The short answer
Councils in England assess how much you contribute towards residential or home care through a financial means test. If you have given away money, property, or other assets specifically – or even just significantly – to reduce what you would be assessed as owing, the council can treat you as if you still had that asset. This is called deprivation of assets, and it is governed by Annex E of the Care and Support Statutory Guidance, issued under the Care Act 2014 (gov.uk – Care and Support Statutory Guidance).
There is no time limit on this rule. It is entirely separate from inheritance tax’s seven-year rule, and confusing the two is the single most common and costly mistake families make.
What counts as deprivation of assets
The statutory guidance defines it plainly: deprivation of assets means a person has intentionally deprived or decreased their overall assets in order to reduce the amount they are charged towards their care (Annex E, paragraph 6).
The guidance lists common ways this happens, including:
- A lump-sum gift to someone else, or a payment to repay a debt
- Transferring the title deeds of a property to someone else
- Putting assets into a trust that cannot be revoked
- Converting assets into a form that would be disregarded in the means test, such as personal possessions
- Unusually extravagant spending, such as heavy gambling
- Using assets to buy an investment bond with life insurance attached
Not every gift or piece of spending counts. The guidance is explicit that deprivation should only be considered where someone has given up an asset that would otherwise have been taken into account in their financial assessment (gov.uk – Care and Support Statutory Guidance, Annex E, paragraph 10).
A genuine gift is not automatically deprivation
The guidance gives a worked example. If someone gives a family member a £2,000 painting as a personal gift the week before entering residential care, that alone should not be treated as deprivation – it is a personal possession that would likely have been disregarded anyway. But if the same person had used £2,000 from a savings account to buy the painting specifically in order to give it away just before going into care, deprivation should be considered (Annex E, paragraph 10, worked example).
The three-part test councils must apply
Before deciding that deprivation has occurred, a local authority must consider three things, set out in paragraph 11 of Annex E:
- Was avoiding the care and support charge a significant motivation for the disposal? It does not need to be the only reason or even the main one – just a significant one.
- The timing of the disposal. At the point the asset was given away, could the person reasonably have expected to need care and support?
- Reasonable expectation of contributing to costs. Did the person have a reasonable expectation, at that time, that they would need to contribute to the cost of their own eligible care needs?
The guidance is equally clear about the flip side: it would be unreasonable for a council to treat a disposal as deprivation if, at the time it was made, the person was fit and healthy and could not have foreseen the need for care (gov.uk – Care and Support Statutory Guidance, Annex E, paragraph 12).
Worked example from the statutory guidance
The guidance includes a case that shows how much timing matters. Mrs Kapoor has £18,000 in savings. She spends £10,500 on a car, and two weeks later enters residential care, giving the car to her daughter.
- If Mrs Kapoor knew, when she bought the car, that she would soon be moving into residential care, deprivation should be considered.
- If she was admitted to care as an emergency and had no reason to expect it when she bought the car, it should not be treated as deprivation.
The same purchase and gift can be assessed completely differently depending on what the person could reasonably foresee at the time (Annex E, paragraph 10, worked example).
What happens if a council decides deprivation occurred
If a local authority concludes that deprivation has taken place, it does not undo the gift or force the money back. Instead, it charges the person as if the deprivation had not happened – treating the value of the disposed asset as notional capital (or notional income, if income was given up) for the purposes of the financial assessment (Annex E, paragraph 18-19).
In practice, this means someone can end up paying the full cost of their care from their remaining money, even though they no longer have the asset that was given away, because the council calculates their contribution as though they still did.
The person who received the gift can also be pursued
If the asset was transferred to someone else specifically to avoid the charge, that third party becomes liable to pay the local authority the difference between what should have been charged and what was actually charged – up to the value of what they received. If more than one person received a share, each is liable in proportion to what they got (Annex E, paragraphs 20-21).
The guidance includes a worked example: Mrs Tong has £23,250 in savings – all of her assessable assets. One week before entering care, she gives her two daughters and her son £7,750 each, with the sole intention of avoiding care charges. Had she not given the money away, the first £14,250 of her capital would have been disregarded, and she would have paid a weekly tariff income on the £9,000 between the two capital limits – working out at £36 a week. After 10 weeks, she should have contributed £360. Her three children each become liable for £120 – their equal share of that shortfall (Annex E, paragraph 22, worked example).
Recovery is pursued as a debt, and councils can use the County Court process as a last resort, though the guidance directs authorities to Annex D on debt recovery and expects this to be used sparingly.
The current means-test thresholds (2025/26)
Deprivation of assets only matters if it changes how much you are assessed as owing, so it helps to know the actual thresholds a council applies. For 2025/26 in England:
| Threshold | Amount | What it means |
|---|---|---|
| Upper capital limit | £23,250 | If your assessable capital is above this, you pay the full cost of your care |
| Lower capital limit | £14,250 | Below this, your capital is ignored and you contribute only from income |
| Tariff income (between the limits) | £1 per week for every £250 of capital | Added to your assessed income contribution |
These figures were unchanged from the previous year and apply to both residential and non-residential care charging (gov.uk – Social care charging for care and support 2025 to 2026: local authority circular).
The 7-year rule does not apply here – a common and costly confusion
Inheritance tax has a seven-year rule: gifts made more than seven years before death generally fall outside the estate for IHT purposes. Our guide to inheritance tax gift rules covers this in full.
Deprivation of assets is a different system, with no equivalent time limit. A council assessing care charges can look at a gift made ten, fifteen, or twenty years ago and still conclude it was deliberate deprivation, provided the three-part test in Annex E is met – in particular, whether the person could reasonably have expected to need care at the time. Surviving seven years protects a gift from inheritance tax. It does not, on its own, protect it from a deprivation of assets assessment.
This distinction catches out a lot of families who have taken IHT planning advice and assumed the same seven-year clock applies to care costs. It does not.
What actually protects your home in the means test
Some protections are automatic and do not depend on avoiding an assessment at all.
The mandatory property disregard while a spouse or qualifying relative lives there
Your home is completely disregarded from the means test for as long as certain people continue to live in it, including your spouse or civil partner, or a relative who is 60 or over, or incapacitated. This disregard is mandatory – the council has no discretion to include the property in this situation (Care and Support Statutory Guidance, Annex B).
The 12-week property disregard
If you move into a care home permanently and nobody who qualifies for the mandatory disregard remains living in your home, its value is still ignored for the first 12 weeks of your stay. This gives you or your family time to decide what to do – for example, whether to sell the property or arrange another form of funding – without facing an immediate forced sale.
Deferred payment agreements
After the 12-week disregard ends, if the property has not been sold, many councils must offer a deferred payment agreement (DPA). Under a DPA, the council pays towards your care costs and places a legal charge on your property, similar to a mortgage, so the debt is secured against it. You do not have to repay until the property is sold, or until 90 days after your death, whichever happens first. Interest is added – in England and Wales, based on the gilt market rate plus 0.15%, reviewed every six months.
DPAs are provided for under section 34 of the Care Act 2014, with local authorities required or permitted to offer them in circumstances set out in regulations, generally including adequate security such as a charge over the property (Care Act 2014, s.34).
Trusts and care fee planning
A will can include a trust that protects one partner’s share of a jointly owned home for children after the first partner dies, because that share passes into the trust rather than outright to the survivor – our guide to setting up a trust in a will explains how this works. That is a well-established, lawful arrangement.
What does not work reliably is a scheme that asks you to give away your own assets during your lifetime while continuing to benefit from them – for instance transferring your home into a trust but continuing to live in it rent-free. Local authorities routinely investigate and challenge these arrangements as deliberate deprivation of assets, applying exactly the same three-part test described above. If avoiding future care charges was a significant motivation, the disregard does not change that outcome – it simply adds a layer of legal complexity on top.
Anyone considering asset protection for care costs should get independent advice from a solicitor who specialises in this area (look for accreditation through the Society of Trust and Estate Practitioners, STEP, or Solicitors for the Elderly), rather than using a generic template scheme sold on the promise of “protecting the family home.”
What to do if you think a council has wrongly assessed deprivation
If a local authority decides deprivation has occurred and you disagree, you can:
- Ask the council to explain its reasoning against the three-part test, and provide evidence that challenges its conclusion – for example medical records showing you had no reasonable expectation of needing care when the gift was made
- Use the council’s formal complaints procedure
- Escalate to the Local Government and Social Care Ombudsman if you remain unsatisfied after the council’s own process is exhausted
Because these decisions turn on evidence about intent and reasonable expectation at a specific point in time, independent advice from a solicitor experienced in community care law is worth getting early, particularly if a significant amount of money is involved.
Summary
Deprivation of assets is the rule that lets a council treat you as still owning money or property you have given away, if avoiding a care and support charge was a significant reason for giving it away and you could reasonably have expected to need care at the time. Unlike inheritance tax, there is no seven-year cut-off – a gift made decades ago can still be assessed. The reliable protections are the ones built into the system itself: the mandatory disregard while a spouse or qualifying relative remains in the home, the 12-week disregard after a permanent care home move, and deferred payment agreements that let you delay paying until the property is sold or 90 days after death. For genuine estate and inheritance tax planning, see our guides to gift rules and the seven-year rule and trusts in a will. If you are also thinking about who should manage your affairs if you lose capacity, see our guide to lasting power of attorney.