Deprivation – How to Deal with it ? Tish Hanifan Barrister Joint Chairman

1. Deprivation – How to Deal with it ? • Tish Hanifan • Barrister • Joint Chairman • Society of Later Life Advisers • NAFAO Annual Conference • April 2013

2. Deliberate Deprivation Charging for Residential Guidelines [CRAG] 6.062 The LA may consider that a resident has deprived himself of a capital asset in order to reduce his accommodation charge. If this is the case the LA may treat the resident as still possessing the asset. • Notional Capital Rules [Reg 25[1] • Resident must prove they no longer possess the asset • Deliberate Deprivation : • Timing - 6.064 'the gift was made at a time and in circumstances in which the donor was in good health and did not anticipate care'. • Motivation : Avoiding care fees must be a Significant factor but does not need to be the main reason

3. Deliberate Deprivation The burden of proof rests with the local authority to show, based on actual evidence, that the resident had the personal, subjective intention of reducing their liability to pay for care fees by their action in disposing of the asset at the time the local authority can imply motive form the circumstances (e.g. Ill-health and forseeability for the immediate need for residential care)

4. Examples [6.067] • Lump-sum payment to third party • Substantial expenditure has been incurred (e.g. on an expensive holiday) • The title deeds of a property have been transferred to someone else • Money has been put into a trust which cannot be revoked [ Treatment of Trusts CRAG section 10 ] • • Money has been converted into another form which would fall to be disregarded (e.g. personal possessionsor Investment Bonds

5. Investment Bonds • Social Security Commissioners decision R (IS) 7/98 :an investment bond falls within the CRAG disregard by virtue of it’s intrinsic nature as a policy of life assurance. [The AOR are largely based on Income Support Regulations ] • CRAG 6.004 to be disregarded an investment bond must be written as one or more life insurance policies that contain cashing-in rights by way of options for total or partial surrender • CRAG 6.005 Income from investment bonds, with or without life assurance, is taken into account in the financial assessment for residential accommodation • Underlying capital from which this derives is disregarded

6. Gifting Assets What guidance is available for Solicitors ? • Gifts of Property : Implications for future liability to pay for long-term care [Guidelines for solicitors prepared by Mental Health and Disability Committee] • Replaced by Making gifts of assets practice note – 16 July 2009 • Lifetime Gifting and Use of Trusts • Gifting by Will

7. Motivation Subjective and Objective motivation Judicial Interpretation • Yule v South Lanarkshire Council (1999) • R V Fife ex parte Robertson [2000] Compare these with : • Dorset v Beeson [2002] • Other reasons for transfer eg Council House purchase

8. Will Trusts • Severance of joint tenancy [ this is not deliberate deprivation even though carried out in lifetime] • Tenants in Common [ proportionate share can vary] • Law of Property Act1925 s36(2) allows unilateral severance provided it is communicated and in writing • Law of Property Act 1925 s196 : Recipient’s capacity is irrelevant • Takes effect only on death of one of the parties • Allows some control as to outcome of bequest in excess of an outright gift

9. Life Interest Tenant • Investment strategies of Trustees - subject to Trustee Act • Responsibility to life tenant and to residual beneficiaries • May have powers to advance capital /income to another class of beneficiary away from the life tenant • Valuation of the life interest

10. Inter VivosTrusts and Deliberate Deprivation • Transfer of assets into a trust may constitute Deliberate Deprivation (CRAG 6.067) • The motivation for the transfer only has to be a “significant reason “ not the main reason • Alternative Reasons for creation of lifetime trust : Inheritance Tax Asset Protection from impact of death, relationship breakdown and insolvency of family member Provision for vulnerable family member [eg disabled child of donor] Preventing need for intervention by Court of Protection

11. Asset Protection Trusts • Widely marketed through mailings and seminars • Examine not just the trust itself but also the surrounding literature • Weigh the emphasis on care fee mitigation against CRAG test of “ substantial” • Consider the validity of claims made as to other reasons for establishing trust

12. Treatment of Trusts • Was trust established inter vivos or by will ? • Deliberate deprivation considerations relating to establishment of the trust [ Why was this done ?] • Guidance is contained in CRAG Chapter 10 on how to treat assets already in a trust [ once deprivation issue determined ] • Personal Injury Trusts disregarded • Discretionary Trusts :must not assume notional capital or Income • Interest in Possession Trusts : will include the income or capital in the means test [NB not both if the income is derived from the assessed capital]

13. Carer’s Rights Propriety Estoppel. Campbell v Griffith 2001 • Priority over Local Authority charge as his equity arose before the charge • Thorner v Majors and others [2009] Lord Walker the “clear and unequivocal” test did not apply to proprietary estoppel. His Lordship preferred that in order to establish a proprietary estoppel the relevant assurance must be “clear enough”. What amounts to sufficient clarity will depend on the context Thorner V Major 2009 New right to support for carers needs in Draft Care and Support Bill implementation April 2015

14. Getting it Right • Evidential Basis for Decision • Documented and reasoned grounds for decision essential to prevent legal challenges • CRAG references • Burden of Proof - who has to prove what ? • Beneficial and/or Equitable interest eg partial shared ownership or claim for “rights in relation to property • Procedural matters

15. Enforcement • Health and Social Services and Social Security Adjudications Act 1983(HASSASSAA) section 21 “the 6 month rule “ • (HASSASSAA 1983) Section 22 ; Charge on a property where resident owns a property and fails to pay the assessed charge • A charge is created by the LA declaring in writing that the charge is being created. • Joint ownership creates an interest in the proceeds of sale not the property itself and LA must in such cases register a Caution • Insolvency Act 1986 • Deferred Payment Scheme - charge following agreement between homeowner and LA