Deprivation of Assets and Enforcement of Debts

1. Deprivation of Assets and Income

Context and Definition of Deprivation

The Care Act 2014 is clear that people should pay a fair contribution to the cost of the Care and Support/Support services they receive. The financial assessment process under the Act is clear and a person or carer should never have to contribute more than they can afford towards the cost of their Care and Support.

Nonetheless sometimes a person will intentionally deprive themselves of an asset they have or an income they receive in order to minimise the financial contribution they make to their Care and Support services.

The Care Act  contains provisions for dealing with deliberate avoidance. If the Local Authority has reasonable grounds for concluding that a person has intentionally deprived themselves of an asset or of income for the purpose of avoiding care charges it can take steps under the Act to recover lost income either from the person or from the third party that the asset or income has been transferred to. There are also provisions in the Insolvency Act 1986 that enable the Local Authority to recover the lost income in cases where the Care Act provisions do not apply.

The Care Act Statutory Guidance gives detailed guidance on deprivation of assets at Annex E and Local Authorities must follow this guidance unless there is a good reason in a particular case not to do so.

Assets that may be Deprived

A person can deprive themselves of assets (capital) in many ways, but common approaches may be:

1. Making a lump sum payment from savings held to someone else, for example as a gift;
2. Substantial sudden expenditure that is out of character with the persons usual spending habits;
3. Transferring the legal title of a property to someone else;
4. Putting assets into a trust that cannot be revoked;
5. Converting assets into another form that would be disregarded under a financial assessment (for example, using savings to purchase jewellery or a car);
6. Reducing capital by living in a manner that is uncharacteristically extravagant (for example starting to gambling excessively); or
7. Using assets to purchase an investment bond with life insurance.

Income that may be Deprived

It is also possible for a person to deliberately deprive themselves of income, for example:

1. Allowing someone else to receive or spend their state pension or welfare benefits;
2. Giving away or selling rights to an occupational pension income; or
3. Transferring income from a property or business rental to someone else.

Deciding whether assets or income have been disposed of

Sometimes a person will falsely advise the Local Authority that they no longer possess, benefit from or have beneficial rights to an asset or income in order to try and minimise their financial contribution to Care and Support services.

Where it is clear the person previously owned that asset or income, it is up to the person to prove to the Local Authority that they no longer possess, benefit from or have beneficial rights to it. The Local Authority may then make whatever enquiries are reasonably necessary to establish the likely reason for the disposing of assets or income. This will usually include asking the person to provide an explanation of their reasons together with supporting documents.

If the person or carer cannot prove that they no longer have the asset or income in question, the Local Authority is able to treat them as still possessing the asset or income.

If the person or carer can prove that they no longer have the asset or income in question, the Local Authority must consider all of the available information, including any explanation provided and decide whether avoiding charges was one of the reasons for disposing of the asset or income.

Deciding whether a person or carer has intentionally deprived themselves of an asset or income

When the Local Authority is satisfied that the person no longer possesses, benefits from or has beneficial rights to an asset or income it must decide whether they have intentionally deprived themselves of it for the purpose of avoiding or reducing a financial charge.

Not all deprivations will be with the intention of avoiding charges for Care and Support and the Local Authority must be satisfied that the asset or income was disposed of with the intention of avoiding such charges. Avoiding charges could be one of a number of reasons for the transaction and the fact that the person would be assessed to pay a lower charge is not of itself sufficient.

In considering the reasons for disposing of an asset or income the Local Authority must consider the person's Wellbeing and right to choose how to spend their money.

Where the disposal took place some time ago, the local authority will need to consider whether the person is likely to have known at that time that they would have a need for Care and Support at some point in the future and whether they were aware that there may be a charge to pay.

The Local Authority should make such enquiries as are reasonably required into whether a deprivation of assets or income has occurred, rather than relying solely on the declaration of and evidence produced by the person or carer. Careful consideration should be given to Annex E of the Care Act Statutory Guidance.

When the Local Authority has decided that there was an intention to avoid or reduce the amount of the contribution for Care and Support, it must explain its reasons for reaching that decision. It should also give details of how to challenge that decision through the complaints process.

Whether or not a person or carer is found to have deprived themselves of an asset or income to avoid Care and Support charges should not affect the provision of the Care and Support service they receive from the Local Authority.

Action when a Deprivation of Assets or Income has occurred

If the Local Authority concludes that a person or carer has intentionally deprived themselves of an asset or income for the purpose of avoiding Care and Support charges they can either:

1. Charge the person as if they still possessed the asset or income; or
2. If the asset or income has been transferred to someone else, seek to recover charges from that person. However, the local authority cannot recover more than the person benefitted from the transfer.

The Local Authority should consider treating the person as if they still possess the asset or income in the first instance and assess the charges payable accordingly. However, if the person has no remaining assets from which to pay the charges, consideration can then be given to the alternative option of recovery from the person who benefitted from the transfer.

Where the Local Authority decides to charge the person as if they still possessed the asset, the amount treated in this way is known as notional capital. The Local Authority should clearly set out how much notional capital is being included in the financial assessment and must apply the diminishing notional capital rule. That means the amount of notional capital must be treated as being reduced by the amount the person is charged.

Where the Local Authority makes a charge and payment is not made it has the power to use County Court processes to recover debts. See Enforcement of Debts.

Further guidance

The Local Government and Social Care Ombudsman has issued guidance to councils on the issue of deprivation of capital decisions.

Based on lessons from the complaints it receives, the guidance is aimed at financial assessment practitioners in local authorities and is based on lessons from complaints.

See: Deprivation of Capital Guidance for Practitioners

2. Enforcement of Debts

Where a person has accrued a debt, the Local Authority may use its powers under Sections 69 and 70 of the Care Act to recover that debt. Before doing so, the Local Authority must consider whether this is a case in which a Deferred Payment agreement could be offered. If so, the Local Authority may not bring court proceedings unless it has offered a Deferred Payment agreement and that offer has been declined.

Deciding whether to recover debt

The Local Authority should first consider and decide whether it is appropriate to seek to recover the debt at all. Whilst the power to recover debt exists in the Care Act there is no duty to do so and in some cases the Local Authority may choose not to recover the debt, or to recover only part of the debt. Examples when the Local Authority may choose not to recover debt include:

1. Where the amount of debt is small and the costs of recovery would be disproportionate; and
2. Where the person or their representative was genuinely unaware that the asset or income in question needed to be included in a financial assessment process.

Deciding the best course of action to recover debt

The Care Act recognises that the recovery of debt from those who are receiving Care and Support is a sensitive issue and when considering local policy reminds the Local Authority that it is bound by the public law principle of 'acting reasonably at all times' as well as human rights legislation and the duty to promote individual Wellbeing.

The expectation under the Care Act is that the Local Authority will explore all reasonable avenues before using its powers to seek formal debt recovery.

The Local Authority should consider whether:

1. There was a deliberate avoidance of payment; or
2. Whether non-payment was due to circumstances beyond the person's control (for example changes in the person's mental capacity, an administrative error or a hospital admission).

General Principles of debt recovery

The statutory guidance outlines the following general principles that the Local Authority should bear in mind when approaching debt recovery:

1. Possible debts must be discussed with the person or their representative at the earliest opportunity;
2. The Local Authority must act reasonably at all times;
3. Arrangements for debt repayment should be agreed between all the relevant parties;
4. Repayments must be affordable; and
5. Court action should only be considered after all other reasonable avenues have been exhausted.

Non-Court action to recover debt

It is important that the Local Authority considers the full range of options before going to Court. This will include consideration of whether a deferred payment agreement can be offered covering the sum owed. Court proceedings cannot be brought where a deferred payment agreement could have been offered unless that offer has been made and declined.  Further, if no or little effort to reach an agreement has been made, the Court may hold this against the Local Authority when making an order for payment of costs incurred by the Local Authority in taking the matter to Court. The greater the person's need the more effort should be made to resolve the issue outside of Court.

The Care Act expects the Local Authority to communicate effectively with the person or carer about their debt and to utilise its social work skills wherever appropriate when working with a person or carer to resolve the issue of debt recovery.

The following are some of the ways that debt recovery issues can be resolved out of Court:

1. Negotiation;
2. Advocacy to support the person to understand the options available;
3. Supporting a family member to become Attorney or Deputy;
4. The Local Authority applying for Deputyship;
5. Arbitration; or
6. Mediation

Annex D of the Care Act Statutory Guidance should be carefully considered. There is also guidance published by the Ministry of Justice (Practice Direction-Pre-Action Conduct) to support the Local Authority in trying to avoid the need for court action.

In some cases the issue will be resolved as a result of positive contact, either because the person has paid the full amount, an agreement is reached about repayment terms or the person has agreed to defer the debt through a Deferred Payment Agreement. For information about Deferred Payment agreements see the Deferred Payment Agreements and Alternative Financial Arrangements section of this guide.

Debt recovery where a person lacks capacity

Where a person lacks capacity to make financial decisions and they have debts that the Local Authority intends to recover the Local Authority should:

1. Establish whether there is a person legally authorised to make financial decisions on their behalf (for example a Deputy appointed by the Court of Protection or a Power of Attorney); and
2. Liaise with the person legally authorised to make financial decisions and establish whether any of the out of Court arrangements are appropriate and agreeable; or
3. Request family apply to the Court of Protection for a Deputyship; or
4. Where there is no family or if family choose not to do so the Local Authority should consider applying to the Court of Protection for a Deputyship; but
5. Where the conflict between the Local Authority and the person in relation to debt recovery make a Deputyship application inappropriate, the Local Authority should apply to the Court of Protection to appoint an independent Deputy.

The Local Authority should not liaise with the person or send them any correspondence that they may find threatening.

Court action to recover debt

Ultimately, the Local Authority may instigate County Court proceedings to recover debt. However, they should only use this power after other reasonable alternatives for recovering the debt have been exhausted and (where relevant) a deferred payment agreement has been offered and declined

For information about the process of making an application to the County Court see Annex D of the Care Act Statutory Guidance.

Non-Compliance with a Court order

Where there is a Court order or judgment for payment, but the person or carer has not complied with it, the Local Authority can approach the Court and request they issue enforcement proceedings. There are various methods of enforcement and the Local Authority will need to think carefully about which may be the most appropriate taking into account the person's circumstances and their own responsibilities to the person. The most appropriate are likely to be one of the following:

1. A warrant or writ of control;
2. An attachment or earnings order;
3. A third party debt order; or
4. A charging order.

Preventing further debt from accruing

The County Court judgement on the case is final and when received the case is closed. This means that if the person continues to default on their Care and Support costs after this date a new debt recovery process will need to begin.

It therefore makes sense that the Local Authority agrees with the person how to prevent further debt from accruing and that they are able to make the payments they have been financially assessed as needing to make towards the cost of their Care and Support.

Avoiding the need for debt recovery

There are 2 methods in the statutory guidance that are effective in reducing the likelihood of the need for debt recovery:

1. The Local Authority should clearly discuss with the person or their representative at the outset that Care and Support is a chargeable service and that where the person has been assessed as being able to afford to do so, they will be required to contribute to the cost of that care and how they will be expected to do so; and
2. The Local Authority should ensure that a mental capacity assessment is carried out where there are concerns about a person's capacity to make financial decisions or be involved in a financial assessment process, and that appropriate action is taken to ensure they have someone who is legally able to act as their representative.

When a debt must be written off

Under the Care Act 2014, the time period to recover debts is 6 years from the date when the sum became due to the Local Authority. Where a debt is taking longer to be recovered, provided legal proceedings have been issued within this limitation period, enforcement can continue. If it has not, the debt must be written off.