Summary: The Council did not properly consider all the relevant facts, and follow statutory guidance, before deciding that Mrs X’s mother had deliberately deprived herself of capital assets in order to avoid, or reduce, her contribution to residential care charges. The Council has now reviewed the evidence, decided not to apply the notional capital rules and sent Mrs X new financial assessments. It has apologised to Mrs X and provided a financial remedy to recognise her time and trouble in pursuing the complaint.

The complaint

1. Mrs X made this complaint with assistance from her MP. She complains on behalf of her elderly mother, Mrs Y, who has dementia and other health conditions. Mrs X has power of attorney to manage her mother’s finances and property. Mrs Y is now a permanent resident in a residential care home.
2. Mrs X complains that the Council did not make adequate enquiries and properly consider all the relevant facts before deciding that she and her mother had deliberately deprived Mrs Y of capital assets in order to avoid or reduce her contribution to care home fees.
3. The Council had threatened to take legal proceedings to recover the outstanding care home fees.

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The Ombudsman’s role and powers

4. We investigate complaints about ‘maladministration’ and ‘service failure’. In this statement, I have used the word fault to refer to these. We must also consider whether any fault has had an adverse impact on the person making the complaint. I refer to this as ‘injustice’. If there has been fault which has caused an injustice, we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
5. If we are satisfied with a council’s actions or proposed actions, we can complete our investigation and issue a decision statement. (Local Government Act 1974, section 30(1B) and 34H(i), as amended)

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How I considered this complaint

6. I have discussed the complaint with Mrs X. I considered all the information she and the MP’s caseworker sent including the Council’s replies to her complaint and other correspondence.
7. I considered the comments Mrs X and the Council made in response to my draft decision.

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What I found

8. The Care Act 2014 and the associated Care and Support Statutory Guidance (“the guidance”) set out the rules councils must follow when they undertake a financial assessment to decide how much a person must pay towards the costs of residential care.
9. The law says people with capital over the upper limit (currently £23,250) are expected to pay the full residential care home fees. Once their capital goes below the upper capital limit, they pay an assessed contribution towards care home fees.

Deprivation of capital

10. Annexe E of the statutory guidance covers the deprivation of capital. It says:
• When undertaking or reviewing a financial assessment, a local authority may identify circumstances that suggest a person may have deliberately deprived themselves of assets to reduce the level of the contribution towards the cost of their care;
• People should be treated with dignity and respect and be able to spend the money they have saved as they wish – it is their money after all. Whilst the Care Act 2014 represents an important step forward in redefining the partnership between the State and the individual, it is important people contribute to the care costs they are responsible for. This is important to the overall affordability of the care and support system. A local authority should therefore ensure people are not rewarded for trying to avoid paying their assessed contribution.
• But deprivation should not be automatically assumed. There may be valid reasons why someone no longer has an asset and a local authority should ensure it fully explores this first;
• Deprivation of assets means where a person has intentionally deprived or decreased their overall assets to reduce the amount they are charged towards their care. This means that they must have known that they needed care and support and have reduced their assets to reduce the contribution they will be asked to make towards the cost of that care and support;
• A person can deprive themselves of capital in many ways, but common approaches may be: (a) a lump-sum payment to someone else, for example as a gift; (b) substantial expenditure has been incurred suddenly and is out of character with previous spending.
11. Paragraph 8.27 of the guidance states “People with care and support needs are free to spend their income and assets as they see fit, including making gifts to friends and family. This is important for promoting their wellbeing and enabling them to live fulfilling and independent lives. However, it is also important that people pay their fair contribution towards their care and support costs”.
12. Paragraph 11 of Annex E sets out the questions a council should ask before deciding whether deprivation for the purpose of avoiding care and support charges has occurred:

(a) whether avoiding the care and support charge was a significant motivation in the timing of the disposal of the asset; at the point the capital was disposed of could the person have a reasonable expectation of the need for care and support?

(b) did the person have a reasonable expectation of needing to contribute to the cost of their eligible care needs?

Financial assessment

13. The Care Act 2014 states that once a council has assessed a person’s care and support needs it should decide whether the needs are eligible for council support. If the person has eligible needs, it must then assess a person’s financial resources. These steps should take place before a council creates a personal budget and arranges the services.

What happened

14. After Mrs Y’s husband passed away in 2001, Mrs Y, and her daughter Mrs X, inherited equal shares of Mr & Mrs Y’s home. Mrs Y remained in the property until early 2015. Mrs X and her husband provided support with housework, shopping and gardening.
15. In early 2015 Mrs Y moved in with Mr & Mrs X. By then, she was in her early nineties and was finding it increasingly difficult to manage daily living activities. The intention was that Mrs Y would live permanently with her daughter and son-in-law.
16. Mrs X was granted lasting power of attorney to make decisions on finances and property for Mrs Y in February 2015. Mrs X says her mother still had capacity to make financial decisions at this time.
17. Mrs X says her mother contributed to the cost of food, fuel bills and other household expenses from her pensions and Attendance Allowance. She also used her own income to pay for services such as hairdressing and chiropody.
18. In April 2015 Mrs Y spent two weeks in a care home while Mrs X went into hospital and recovered from an operation. Mrs Y then returned to live with Mr and Mrs X.
19. Mrs Y was diagnosed with dementia in November 2015.
20. Mrs X and Mrs Y decided to sell the bungalow they jointly owned. It was eventually sold in late January 2016. Mrs X and Mrs Y each received just over £146,000 from the net proceeds of the sale.
21. In February 2016 Mr & Mrs X agreed to convert their garage to create a ground floor bedroom and wet room for Mrs Y. Mrs Y had been finding it difficult to climb stairs to the bedroom and she did not want them to install a stairlift. Mr & Mrs X agreed to do the building works and fit out the room. Mrs Y paid for these works – which cost £50,000 – from her share of the proceeds of the sale of the bungalow.
22. In February 2016 Mrs Y wrote cheques to gift £30,000 in total from her share of the proceeds of the sale to her eight grandchildren and great-grandchildren.
23. In late 2016 Mrs X’s health started to deteriorate. Her GP recommended she arranged more frequent respite care for Mrs Y so she could have regular breaks from her caring role. Mrs Y funded her own short stays in a residential care home from her savings.
24. In February 2017 Mrs Y had a fall while she was on a short break in the care home. She was admitted to hospital and discharged to the care home. Mrs Y returned to live with Mr & Mrs X but it soon became apparent that her care needs had increased and Mrs X could no longer manage to look after her at home.
25. Mrs Y moved back to the same care home as a self-funder. The care home fees were £553.84 per week.
26. In early July 2017 Mrs X contacted the Council to request a Care Act needs assessment because Mrs Y’s capital had decreased and was just above the £23,250 upper capital limit.
27. In September 2017 a social worker completed the assessment and decided Mrs Y had eligible care needs and required 24-hour care in a residential home. Mrs Y wished to remain in the same care home.
28. The social worked noted that Mrs X managed Mrs Y’s finances. He saw a bank statement with a balance just over the £23,250 capital limit. He said Mrs Y would need a financial assessment for a permanent placement.
29. On 20 October 2017 the Council authorised Mrs Y’s care package. It approved the permanent placement from 12 September 2017.
30. Three days later, the Council sent a letter and financial assessment form to Mrs X. Mrs X stated on the form that Mrs Y’s share of the proceeds of the bungalow sale had been spent on care home fees. She provided evidence of Mrs Y’s income from a state pension and her late husband’s occupational pension. She also sent Land Registry records confirming the sale of the bungalow and bank statements showing a balance of £23,734.
31. On 27 November 2017 the Financial Assessment team asked Mrs X for “evidence of funds depletion” and bank statements.
32. Mrs X replied in early December 2017. She explained that Mrs Y had paid for the building work to convert the garage from her share of the proceeds of sale. She said she had also given money to her grandchildren and great-grandchildren (she did not specify the dates or amounts). Mrs Y had paid care home fees for the short respite breaks and self-funded her permanent care since February 2017. She said she had already provided bank statements and had no other proof of expenditure.
33. In mid-December 2017 the Financial Assessment team wrote to ask Mrs X for more information. It said

“you have not proved where the money has gone from the sale”.

“The Care Act is clear that it is for the person making the application to prove that they no longer have the asset and if they are not able to account for their expenditure which in this case is £150,000 spent over two years the local authority must assess them as though they still had the asset”.

34. The letter warned that Mrs Y would have to pay the full care home fees if satisfactory evidence was not provided. It asked Mrs X to send:

• the completion statement for sale of bungalow;
• bank statements to show evidence of depletion of funds and to explain any large or irregular transactions;
• evidence of the amount she had spent on care home fees;
• evidence of the amount spent on building work for conversion of the garage.

35. Mrs X replied in early January 2018. She said she intended to seek legal advice and consult her MP. She also sent a copy of the completion statement for the sale of the bungalow.
36. In mid-January 2018 the Council sent a letter addressed to Mrs Y (instead of Mrs X). It said she would be charged the full cost of care home fees from 12 September 2017 and it would send invoices every four weeks. Around the same time the Council replied to enquiries from Mrs X’s MP. It agreed to reconsider the financial assessment if Mrs X sent in the requested evidence.
37. In late January Mrs X sent receipts for the care home fees and evidence about the costs of the garage conversion to the Financial Assessment team. She asked for a meeting with officers to try and resolve matters. She said her mother could only afford to pay £1,136.80 every four weeks (her combined state and occupational pension) minus the £24.90 Personal Expenses Allowance for people in residential care. She enclosed a cheque for £6,223.20 for the period September 2017 to late February 2018 based on this amount.
38. The Council decided the fees for the plans and building regulation fees for the garage conversion were reasonable expenditure. It also allowed £39,717.85 for care home fees based on the invoices Mrs X submitted. In early February 2018 it wrote to tell her this still left £81,364.36 from Mrs Y’s share of the proceeds of sale unaccounted for.
39. Mrs X said she would pay £1,037.20 as a contribution toward the fees every four weeks because she could not afford to pay the full fees. She was disappointed that the Council had not replied to her request for a meeting.
40. After Mrs X’s MP intervened, the Council arranged for Mrs X to meet a Financial Assessment officer and the team manager in early April 2018. The Council no longer has the notes of this meeting. Mrs X gave officers bank statements covering a two year period.
41. The Council reviewed the evidence Mrs X took to the meeting. On 17 April it informed her it had agreed to allow £50,000 as reasonable expenditure for the building works. Although Mrs X had not kept invoices, it accepted a bank statement as evidence of the cost of the work.
42. The letter did not explain the Council’s view about the £30,000 Mrs Y had gifted to her grandchildren and whether it regarded this as deprivation of assets. Mrs X said the bank statements she gave to officers at the April meeting included these transactions.
43. The Council said Mrs X must have known her mother needed care and support before she disposed of the capital because she had first stayed in a care home in April 2015. It said it would treat £67,455.43 of capital that Mrs X could not account for as notional capital. It estimated the notional capital would be not go below the £23,250 capital limit until February 2022.
44. The Council’s letter included crude figures to show how it had calculated the figure of £67,455.53. It did not provide a spreadsheet to show details of its calculations and allowances. Mrs Y’s £146,064.70 share of the proceeds of the sale of the bungalow was correctly treated as capital. To this amount, it added £36,091.17. It described this as income from benefits. I understand this was Mrs Y’s total income from a state pension, occupational pension and Attendance Allowance. The letter did not explain why the Council had decided to treat income from benefits as capital. Nor did it explain the period covered by this sum, or why it believed Mrs Y had not used this income to meet her living expenses while she was living with Mrs X or self-funding her care.
45. Mrs X’s MP continued to correspond with the Council. The Council said it was for the service user to prove they had not given away their assets to avoid care charges. The Council did not change its decision that there had been deprivation of assets.
46. The Council continued to send invoices to Mrs X every four weeks. In December 2018 it said it would start debt recovery action if the balance due was not paid within the next seven days. By late May 2019, when it responded to our enquiries, the Council said the outstanding debt was £25,247.23. It agreed to put a hold on debt recovery action pending the outcome of our investigation.

Analysis

47. Mrs Y acquired a significant capital asset in January 2016 when her former home was sold. The Council was entitled to consider how Mrs Y had spent her share of the proceeds over 21 months and reduced her capital to just over £23,000 by the time it did the financial assessment in October 2017.
48. It is not for the Ombudsman to decide if there has been deprivation of assets and whether it is appropriate to apply the notional capital rule. That is a decision the Council must make. Our role is to ensure it made the decision properly with due regard to the law, the statutory guidance and relevant evidence.
49. A decision that there has been deliberate deprivation of assets to avoid or reduce care home fees has a major financial and emotional impact on the service-user and their family. It is therefore important that the system is operated fairly, all the relevant facts and evidence are properly considered in each case, and councils give a clear explanation of their decisions. Given the significant sums involved, and the financial impact on the service-user and their family, we would expect councils to provide detailed reasons and calculations.
50. I found fault in the way the Council reached and communicated its decision for the following reasons:
• The letter of 17 April 2018 did not refer explicitly to, and apply, the criteria in paragraph 11 of Annex E to the Care and Support statutory guidance. Councils must follow this guidance when they make a decision about deliberate deprivation of assets;
• The Council has not explained or justified its decision to include Mrs Y’s income from benefits in her capital assets. Income from benefits is not capital. I understand Mrs Y used her income to contribute to household expenses while she lived with Mrs X and spent it on any additional needs not covered by the care home fees when she was in respite care or self-funding her stay in the care home from February 2017;
• The Council did not give Mrs X a detailed breakdown of its calculations, such as a spreadsheet, so she could not understand or check its figures;
• The Council did not fully explore the £30,000 Mrs Y gifted to her grandchildren in February 2016 – the Council has not said whether it considers this transfer of money was deliberate deprivation motivated by a wish to reduce her assets.
51. These faults caused Mrs X significant distress and worry. She was worried about how she will pay for her mother’s care and the threat of legal proceedings to recover the debt. She cannot be confident that the Council carried out the financial assessment correctly. She did not get a clear explanation of its reasons for concluding there has been deliberate deprivation of assets.

Agreed action

52. To remedy the injustice caused by this fault, the Council has taken the following action:
• It has apologised to Mrs X for failing to give her a properly reasoned decision about why it had concluded that Mrs Y had deliberately deprived herself of capital assets;
• It will pay Mrs X £250 within one month to recognise her time and trouble in pursuing this complaint;
• It has written to Mrs X to say it was wrong to treat Mrs Y’s income from benefits as part of her capital in April 2018. It has decided to disregard the £30,000 she gifted to her grandchildren and great-grandchildren;
• It has reviewed all the financial assessments since September 2017 to take account of the capital Mrs Y actually had in her bank account at the relevant time and applied tariff income for the capital between the upper and lower capital limits. It has recalculated Mrs Y’s contribution to the cost of her care based on these new figures;
• It will review the need to issue guidance or arrange training for officers in the Financial Assessment team to ensure they apply the correct statutory criteria, follow a rigorous decision-making process, and send properly reasoned and evidenced decisions in cases where deprivation of assets may have occurred.

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Final decision

53. I have completed the investigation and found the Council’s fault caused injustice to Mrs X and Mrs Y. The Council has agreed to provide a satisfactory remedy.

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Investigator's decision on behalf of the Ombudsman