Making gifts of assets

5.1.1 Paying for care

If your client can afford to pay for a place in a care home, they can arrange this independently, though they should have a needs assessment to consider all their care options including whether and how much financial assistance would be available from their local authority. The assessment of need for care provision does not depend on the need for funding. Some care homes do not provide accommodation for local authority-funded residents.

Where the local authority pays or contributes to the cost of care:

• A standard weekly charge is fixed which represents the true economic cost of providing the accommodation, or a weekly charge is agreed for a place in an independent home which should represent the cost of the place to the authority.
• Residents must generally contribute in accordance with their resources up to the weekly charge, but no one should be required to pay more.
• The local authority will either pay the full weekly charge to the care home and collect the resident's contribution or, with the agreement of all parties, pay the home net of the person's assessed contribution, with the resident paying this to the care home direct.
• The contract should state what is included in the charge and what are extras.

If your client wishes to move to a care home which is more expensive than the local authority will pay on the basis of their assessed needs, and if the local authority can show that there are suitable homes with vacancies in the local area, you should note that the cost difference will need to be topped up by a third party such as a family member.

5.1.2 Means testing

For those who cannot afford the standard charge for their care, local authorities will make an assessment of their ability to pay. This is reviewed annually, though a reassessment can be requested at any time.

The assessment applies to both permanent and temporary care, and is based on the means only of the person in need of care: a partner's or spouse's resources are not taken into account, though jointly owned assets may be assessed. The National Assistance (Assessment of Resources) Regulations 1992 (as amended) and the Charging for Residential Accommodation Guide set out how fees are calculated. Half the occupational and private pensions of a resident can be disregarded if they are paid to a non-resident spouse or civil partner.

The basis of assessments for care provision is largely in line with that for income support, but there are some significant differences:

Some capital is disregarded, and everyone is allowed to keep a set level of capital. The level is set each year in the National Assistance (Assessment of Resources and Sums for Personal Requirements) (Amendments) (England) Regulations and the National Assistance (Assessment of Resources and Sums for Personal Requirements) (Amendments) (Wales) Regulations.

Notional capital and notional income rules may apply where the local authority believes there has been deliberate deprivation of assets.

A small amount of income is disregarded if it would have been incorporated into the assessment for the Savings Credit element of Pension Credit. This is to ensure that pensioners who save still see some benefit of this when they are resident in a care home.

The local authority may agree to defer payment by means of a legal charge on the resident's property, so that the resident does not have to sell their home during their lifetime. The resident must contribute to their care fees from available resources, making up any shortfall through the legal charge. Interest starts to accrue 56 days after the resident's death. A deferred payment option will not be provided where the resident's income or capital is assessed as being above the upper capital limit outlined in the National Assistance (Assessment of Resources) Regulation.

All residents retain an allowance for personal expenditure on toiletries, stationery and treats, etc. This is set each year in:

• the National Assistance (Assessment of Resources and Sums for Personal Requirements) (Amendments) (England) Regulations, and
• the National Assistance (Assessment of Resources and Sums for Personal Requirements) (Amendments) (Wales) Regulations.

The local authority has discretion to increase the allowance, but it should not be used as top-up towards more expensive accommodation.

Local authorities should offer to carry out a benefits check on residents' behalf, since it is in their interests to ensure that people in care homes are receiving maximum state benefits.

5.1.3 Anti-avoidance measures and deprivation of assets

In most cases, the intention behind making gifts of assets is the most important factor. If a local authority believes that an asset has been given away with the intention of creating or increasing entitlement to means tested benefits, it may decide that the donor has notional capital of equivalent value to that of the asset given away.

Your client will be particularly vulnerable if they are deemed to have notional capital since, although the local authority is obliged to provide care, this does not have to be in a residential home. Moreover, your client may not be entitled to financial assistance towards the fees. The local authority may still be obliged to provide care, but the local authority could seek payment using debt recovery methods, as in the case of Robertson v Fife [2002] UKHL 35.

A local authority financial assessment must follow the needs assessment. There is a question mark regarding whether Robertson v Fife would stand up in England because of the slightly different wording of the legislation, such that the local authority would refuse to provide the care because the notional capital makes it otherwise unavailable (see 'Community Care and the Law' from paragraph 8.91), and as such are arguably under no obligation to provide residential accommodation under s.21 National Assistance Act 1948. However, the person might qualify as a vulnerable adult, regardless of notional capital, where they are in need of such accommodation because they cannot arrange their care or no longer has any resources to fund their care.

If the local authority believed that a significant part of the intention to transfer an asset was to increase entitlement to financial assistance, they could impose a charge on the asset after it had been gifted, or even recover the asset. For a local authority to pursue a claim they would have to show what the donor's intention was at the time of disposal. It may be difficult for the donor or donee to give evidence as to the donor's intentions and if another purpose of the gift cannot be established or indicated, the judge may conclude that it must have been to avoid means testing.

One way to establish the intention is the foreseeability or immediacy of the need for care. Any decision to reject or accept the evidence requires an overall assessment of that evidence by the local authority - see Beeson v Dorset County Council [2002] HRHR 15. If, for example, your client was fit and healthy and could not have foreseen the need for residential care, it would be unreasonable for the local authority to treat the transfer of assets as deliberate deprivation. However, Yule v South Lanarkshire Council [1999] 1 CCLR 546, states that there was no time limit on local authorities when deciding whether a person had deprived themselves of assets for the purposes of avoiding residential care fees.

If a local authority were to pursue a claim for care funding, your client could challenge that decision but would bear the burden of proof that the authority's decision was Wednesbury unreasonable - Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB233). This process could be protracted, involving local authority complaints and ombudsman procedures, and this could be very stressful for your client and expensive if it involves court proceedings.

5.1.4 Enforcement of fees for care

Local authorities can take steps to recover contributions towards care charges, and their assessment of ability to pay may take into account property that has been given away for the purpose of avoiding means testing. Their enforcement options include:

• taking proceedings in the Magistrates' Court to recover sums due as a civil debt (section 56, National Assistance Act 1948)
• imposing a charge on any property belonging to the resident, with interest chargeable from the day after death (sections 22 and 24 of the Health and Social Services and Social Security Adjudication’s (HASSASSA) Act 1983)
• imposing a charge on property transferred by the resident, within six months of going to residential care or while in care, on property transferred by the resident with the intention of avoiding contributions (section 21, HASSASSA Act 1983)

If the debt for unpaid contributions reaches £750, the local authority could start insolvency proceedings to declare the resident bankrupt. Transactions at an undervalue may be set aside within two years, or within five years if the person made bankrupt was insolvent at the time of the transaction, which is unlikely. See sections 339-341 Insolvency Act 1986. A gift may be set aside without time limit and without bankruptcy if the court is satisfied that the transfer was made for the purpose of putting assets beyond the reach of a potential creditor or otherwise prejudicing the creditor's interests. See sections 423-425, Insolvency Act 1986.

This provision is exceptionally wide, and the court has extensive powers to restore the position to that which it would have been had the gift not been made. The Court of Appeal in Derbyshire CC v Akrill [2005] EWCA Civ 308, considered the application of section 423, concluding that the section could apply where a person transferred his house by deed of gift to his children for the purposes of putting it beyond the reach of those who might have a claim in respect of the costs of his imminent residential care.

Although some local authorities have threatened to use insolvency proceedings, few have actually done so, perhaps because of lack of expertise, cost or the prospect of bad publicity. However, with increasing pressures on local authority resources to provide community care services, the incidence of this may rise in the future. There is evidence that families can be placed under considerable pressure to pay for care, even where the gift was entirely innocent.

5.2.1 Extent of NHS-funded care provision

Where someone's care is primarily one of health, the full cost of care is the responsibility of the NHS. However, the distinction between care services that can and cannot be provided as part of a package of services is one of degree, and in borderline cases it depends on a careful appraisal of the facts of the individual case.

The Court of Appeal considered whether a local authority could lawfully provide nursing care for a chronically ill patient in the case of R v North & East Devon Health Authority ex p Coughlan [2000] 3 All ER 850. In that case her care included nursing care but was not confined to it. A very general indication as to where the line is to be drawn between lawfully providing care or not is dependant on whether the nursing services were either:

1. Merely incidental or ancillary to the provision of the accommodation which a local authority is under a duty to provide.
2. Of a nature which it can be expected that a local authority could be expected to provide.

The judge confirmed that where the individual's care was primarily one of health, the full cost of care was the responsibility of the NHS. Until recently, in England it was the local NHS body's responsibility to determine what they meant by a primary health care need, whereas in Wales it remains up to the local health board. In any event, the NHS body must publish guidance on how eligibility for continuing NHS health care is determined, based on a full assessment of the relevant facts such as the quantity and/or quality of care need and how this is weighed to determine the persons eligibility. See R (Grogan) v Bexley NHS Care Trust [2006] EWHC 4 (admin).

5.2.2 Eligibility for NHS-funded care in England

Eligibility is determined following a full multidisciplinary assessment of the individual's needs which indicate a primary health care need. Certain characteristics of need and their impact on the care required to manage them may help determine eligibility. These characteristics are:

• Nature - the types of need, and the overall effect of those needs on the individual, including the type (quality) of interventions required to manage them
• Intensity - both the extent (quantity) and severity (degree) of the needs, including the need for sustained care (continuity)
• Complexity - how the needs arise and interact to increase the skill needed to monitor and manage the care
• Unpredictability - the degree to which needs fluctuate, creating difficulty in managing needs, and the level of risk to the person's health if adequate and timely care is not provided

Eligibility and ineligibility should not be based on:

• the setting of care
• the ability of the care provider to manage care: only where the successful management of a health care need has permanently reduced or removed an ongoing need will this have a bearing on eligibility
• the use, or not, of NHS-employed staff to provide care
• the individual's financial position
• the need for/presence of specialist staff in care delivery
• the existence of other NHS-funded care
• any other input-related, rather than needs-related, rationale.

The National Framework for NHS Continuing Healthcare and NHS Funded Nursing Care in England came into operation in October 2007. The framework is accompanied by a decision support tool, screening tool and fast-track tool for those with apparent and immediate needs.
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5.2.3 Eligibility for NHS-funded care in Wales

Eligibility in Wales is based on satisfying one of the following criteria:

• The nature or complexity or intensity or unpredictability of the individual's health care needs (and any combination of these needs) requires regular supervision by a member of the NHS multidisciplinary team, such as the consultant, palliative care, therapy or other NHS member of the team.
• The individual's needs require the routine use of specialist health care equipment under supervision of NHS staff.
• The individual has a rapidly deteriorating or unstable medical, physical or mental health condition and requires regular supervision by a member of the NHS multidisciplinary team such as a consultant, palliative care, therapy or other NHS member of the team.
• The individual is in the final stages of a terminal illness and is likely to die in the near future.

Guidance for Wales is contained in WHC (2004) 54: NAFWC 41/2004, which is supported by All Wales Continuing NHS Health Care: Framework for Implementation in Wales, published in 2004. Further advice to the NHS and local authorities on continuing NHS health care (NAFWC32/06) was given in 2006 following the Grogan judgement.

5.2.4 Registered nursing care funding

Your client may receive financial support, even if not eligible for continuing NHS health care, if they live in a care home registered for nursing care, and receive registered nursing care by a registered nurse. This includes any service provided by a registered nurse which involves the provision of care, or the planning, supervision or delegation of the provision of care, other than services which, having regard to their nature and the circumstances in which they are provided, do not need to be provided by a registered nurse. See section 49(2) of the Health and Social Care Act [2001]. Nursing home residents in both England and Wales are now eligible for a contribution of a flat rate towards their care fees.

5.2.5 Transitional arrangements for those in a nursing home before 1 October 2007

Before 1 October 2007, the level of need for residents was assessed as low, moderate or high, with a different financial contribution at each level. Those residents who were on the former high band (£139/week) continue to be funded at the higher level (uprated annually) as the change would otherwise put them in a worse financial position. They can continue to remain on the high band until either:

• their care needs decrease to what would be the middle of low band level and they become entitled to the single rate
• they move from the nursing home
• they no longer need nursing care but choose to continue to reside in a nursing home
• they qualify for continuing NHS health care
• they die.

5.2.6 Aftercare under section 117 of the Mental Health Act 1983

The Mental Health Act 1983 at s117(2) creates a joint duty on the NHS body and social services to provide, in cooperation with relevant voluntary agencies, after-care services for certain mentally ill people, until such time as they are both satisfied that the aftercare service is no longer required.

Section 117 of the act applies to those who have been detained under:

• Section 3 (which provides for the compulsory admission of a patient suffering from any mental disorder to hospital for treatment)
• Section 37 (a hospital or guardianship order made by the Crown or Magistrate Court)
• Section 45A (a hospital direction made by the Crown Court), or
• those who have been subject to a transfer direction made by the Secretary of State under sections 47 or 48.

NHS bodies and social services should not charge for services provided under section 117.

See R v Redcar & Cleveland BC ex p Armstrong: R v Manchester City Council ex p Stennett R: Harrow London BC ex p Cobham [2002] 4 All ER 124.

The act does not define what is meant by aftercare services, but in Clunis v Camden and Islington Health Authority [1998] QB 978, 992 Beldam LJ commented that these 'include social work support, support in helping the ex-patient with problems of employment, accommodation or family relationships, the provision of domiciliary services and the use of day centre and residential facilities'.

It is up to the appropriate authority to determine which aftercare services, within the framework of the care plan, should occur before discharge.

Aftercare services should continue until, after a joint assessment, the NHS body and local authority are satisfied that the person no longer needs them. It is for the authority providing the services to take the lead in deciding when aftercare is no longer required. Funding can end if the patient is no longer in need of mental health care, though in practice this point is unlikely to affect many people. See R v Richmond Upon Thames LBC ex p Watson, The Times, October 15, 1999/ LGO complaint into Bath and North East Somerset Council No 06/B/16774.

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