When an elderly person begins to think about later life planning, two issues often come up. Firstly, appointing a power of attorney and then dealing with the cost of care. These areas sometimes overlap in ways that can be confusing, particularly around the subject of deprivation of assets. This article discusses power of attorney and deprivation of assets in elderly care. It looks at Lasting Power of Attorney and at what deprivation of assets means. Also at how the two interact when it comes to decisions about elderly care and finances.
What is a Power of Attorney?
A power of attorney is a legal document that allows someone (the donor) to appoint another person (the attorney) to make decisions on their behalf if they are no longer able to do so. In England and Wales, the most common type for older people is the Lasting Power of Attorney (LPA). There are two forms:
- Property and Financial Affairs LPA – This covers decisions about money, bank accounts, property, savings, pensions and bills.
- Health and Welfare LPA – This covers decisions about medical treatment, care homes and day-to-day living arrangements.
The attorney has a duty to act in the best interests of the donor at all times. Their role is not to take over ownership but to help manage affairs responsibly, fairly, and in line with the donor’s needs and wishes.
What is Deprivation of Assets?
Deprivation of assets happens when someone deliberately reduces their wealth so that they won’t have to pay as much for care. Local authorities have strict rules about this. That’s because the state does not want people to give away their money and property only to rely on the taxpayer to fund their care.
Common examples of actions that may be treated as deprivation of assets include:
- Giving large sums of money to children or grandchildren.
- Transferring ownership of a house to another person.
- Selling property or possessions for less than their true value.
- Putting money into trusts with the aim of hiding it from the financial assessment.
If the council decides that someone has deliberately deprived themselves of assets, they can treat the person as if they still had that money. This is called notional capital. It means the person may still have to pay for their care as though the money had not been given away.
The Role of a Power of Attorney in This Context
When an elderly person loses capacity, their attorney may be left to make decisions about finances and care costs. This is where the issue of deprivation of assets becomes particularly important.
An attorney cannot simply give away the donor’s money to family members or sell their home cheaply to avoid care fees. Doing so could be considered financial abuse and a breach of their legal duties. Attorneys must remember:
- Their authority is limited to making decisions in the donor’s best interests, not in the interests of other family members.
- They cannot make gifts beyond what is considered “customary” and reasonable (such as birthday or Christmas presents of modest value).
- Any larger gifts or transfers usually require permission from the Court of Protection.
If an attorney makes decisions that look like deprivation of assets, the local authority could challenge them, and in serious cases the Court of Protection may remove the attorney altogether.
How Local Authorities Assess Deprivation
Councils look at both the timing and the intention behind any transfer or disposal of assets.
- Timing: If assets were given away shortly before a move into care, it is far more likely to be treated as deliberate deprivation. By contrast, if someone gave away money many years earlier, when they were fit and healthy, it may be harder to argue it was to avoid care fees.
- Intention: The key question is whether the main motive was to avoid care charges. If there were other genuine reasons (for example, inheritance planning that had been discussed long before care was needed), that may be considered.
Attorneys need to keep clear records of the reasons for any financial decisions. Particularly where money is transferred or property is sold. Transparency is the best protection.
What Attorneys Can and Cannot Do
Here are some practical guidelines for attorneys managing finances under a property and financial affairs LPA:
- Pay for care fees, bills and daily living costs: This is part of the attorney’s core responsibility.
- Make small, affordable gifts on birthdays or Christmas: As long as the value is modest and in line with past habits.
- Sell property at market value if needed for care costs: This is acceptable, but the money must be used for the donor’s needs.
- Invest funds sensibly: Attorneys can invest money, but must choose safe, appropriate options.
Attorneys should not:
- Give away large sums of money to relatives without authority.
- Transfer the donor’s home to themselves or anyone else without court approval.
- Sell property for less than its true market value.
- Try to hide money to qualify the donor for local authority funding.
Read this article on what to consider when putting a parent or the donor in a care home.
The Consequences of Getting It Wrong
If a local authority suspects deprivation of assets, they may:
- Treat the person as still owning the money (notional capital).
- Refuse to fund care until the costs are met from those assets.
- Investigate the attorney’s actions.
In serious cases, the Office of the Public Guardian (OPG) can step in, and the Court of Protection can remove the attorney. Attorneys can also face legal action if they are found to have acted improperly.
Best Practice for Families
Families often worry about how care will be paid for. Here are some sensible steps to avoid problems:
- Plan early: The earlier financial planning is done, the less likely it is to be challenged as deprivation of assets.
- Get professional advice: A solicitor specialising in elder law can help structure finances in a safe and legal way.
- Be transparent: Keep records of all decisions and reasons, particularly where money is moved or property is sold.
- Remember best interests: Every decision must be made with the donor’s needs at the forefront, not those of relatives.
- Apply to the Court of Protection if in doubt: For larger gifts or unusual financial decisions, it is safer to ask the court for permission.
Conclusion
A power of attorney is a powerful tool to help manage an elderly person’s affairs, but it comes with strict responsibilities. Deprivation of assets is a serious issue. Attorneys must tread carefully to avoid being challenged by the local authority or the courts.
The golden rule is simple: attorneys must always act in the donor’s best interests. That means using their money to provide comfort, care, and dignity in later life. It is not trying to shield it for inheritance purposes. With careful planning, honesty, and good advice, families can navigate this difficult area safely and responsibly.
