Summary: The Trust entered into by Mrs X did not amount to a deprivation of assets, so the Council was entitled to take the value of her property into account in her financial assessment.

The complaint

1. Mrs A (as I shall call her) says the Council decided her mother (Mrs X) had deliberately deprived herself of assets to avoid care charges without the proper information. As a result, she is paying full cost care home fees. Mrs A also complains the Council did not offer a deferred payment agreement, so she had to sell her mother’s house at a much reduced price for a quick sale to release the money to pay fees.

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The Ombudsman’s role and powers

2. 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’ (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
3. If we are satisfied with an organisation’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

4. I considered the information provided by Mrs A and the Council. I spoke to Mrs A. Both Mrs A and the Council had an opportunity to comment on an earlier draft of this statement.
5. My draft statement recommended the Council reconsider its view taking into account all the factors in the statutory guidance.
6. In doing so the Council provided significant new information (paragraphs 28 - 33 below) about the nature of the Trust entered into by Mrs X.
7. Mrs A was given an opportunity to comment on the Council’s assertions and I took all comments into account before I reached this final decision.

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What I found

Relevant law and guidance – charging rules

8. The charging rules for residential care are set out in the Care and Support (Charging and Assessment of Resources) Regulations 2014 and councils should have regard to the Care and Support Statutory Guidance.
9. When the Council arranges a care home placement, it must follow the regulations when undertaking a financial assessment to decide how much a person has to pay towards the cost of their residential care.
10. Where a local authority has chosen to charge a person for the services it is arranging it must undertake a financial assessment. When doing so, it must assess the income and capital of the person. A capital asset is normally defined as belonging to the person in whose name it is held, the legal owner. In most cases the person will be both the legal and beneficial owner.
11. The financial limit, known as the ‘upper capital limit’, exists for the purposes of the financial assessment. This sets out at what point a person is entitled to access council support to meet their eligible needs. People who have over the upper capital limit are expected to pay the full cost of their residential care home fees. Once their capital has reduced to less than the upper capital limit, they only have to pay an assessed contribution towards their fees. Where a person’s resources are below the lower capital limit they will not need to contribute to the cost of their care and support from their capital.

Law and guidance – deprivation of assets

12. The Care and Support Statutory Guidance says, “When undertaking or reviewing a financial assessment a local authority may identify circumstances that suggest that a person may have deliberately deprived themselves of assets in order to reduce the level of the contribution towards the cost of their care. In such circumstances, the local authority should have regard to this guidance.”
13. The guidance also says, “Deprivation of assets means where a person has intentionally deprived or decreased their overall assets in order 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 in order to reduce the contribution they are asked to make towards the cost of that care and support.”
14. It goes on “There may be many reasons for a person depriving themselves of an asset. A local authority should therefore consider the following before deciding whether deprivation for the purpose of avoiding care and support charges has occurred:

1. (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?
2. (b) did the person have a reasonable expectation of needing to contribute to the cost of their eligible care needs?

For example, it would be unreasonable to decide that a person had disposed of an asset in order to reduce the level of charges for their care and support needs if at the time the disposal took place they were fit and healthy and could not have foreseen the need for care and support”.

Law and guidance – deferred payment agreements

15. Deferred payment agreements are designed to prevent people from being forced to sell their home in their lifetime to meet the cost of their care. Local authorities must offer them to people who meet the qualifying criteria and who are able to provide adequate security.
16. The qualifying criteria are:

a) person is ordinarily resident in the council’s area.

b) person has needs which are to be met by the provision of care in a care home.

c) person has less than (or equal to) £23,250 in assets excluding the value of their main or only home (for example, in savings, other non-housing assets and housing assets other than their main or only home)

d) person’s home is not disregarded; for example, it is not occupied by a spouse or dependent relative as defined in regulations on charging for care and support (for example, someone whose home is taken into account in the local authority financial assessment and so might need to be sold)

What happened

17. Mrs X, who Mrs A says lived at home independently, decided to put her home into a Trust in February 2017. Mrs A says this was done to protect the property for inheritance purposes, because of the financial state of her son in law’s (Mr A’s) business. The business has since closed. Mrs X was 90 years old at the time.
18. In November 2020, Mrs X fell and was admitted to hospital for a few weeks. In early 2021 she became resident in a care home. Mrs A says Mrs X had suffered memory loss following the fall.
19. In March 2021 the Council wrote to Mrs X with details of her care home charges, taking into account the value of Mrs X’s house. Mrs A wrote to the Council in August with documents which showed the creation of the Trust in 2017. She said at the time Mrs X did not have any foreseeable need for care and the Trust was completed to help with potential probate problems on her death. The Council issued a notice in November saying it would take legal action in respect of outstanding fees.
20. Mrs A wrote formally to complain. She said the Trust was set up to avoid the property from becoming part of her own estate, due to the financial state of her husband’s business (which she explained had since ceased trading). She said at the time of the creation of the Trust, Mrs X was in good health physically and mentally, was not under any medical treatment and was living an independent lifestyle.
21. The Council’s finance manager responded in December. He said he upheld the original decision to include the value of the property in the calculation of Mrs X’s care charges. He said the view of the Council’s Legal department was the Trust was set up deliberately to deprive Mrs X of capital in order to reduce the value of her assessed contribution towards her care charges. He said she had been invited to offer any evidence to the contrary but had not done so.
22. Mrs A complained to the Ombudsman. She said the Council refused to recognise the Trust. She also said that because the Council would not offer a deferred payment arrangement, she had to sell the house quickly at a lower price to pay the care home charges.
23. The Council says the protection of the house for probate and inheritance could have been achieved without a Trust, and Mrs A’s description of it as an ‘asset protection’ gives weight to the Council’s view it was created to avoid care charges. It says Mrs A has provided varying descriptions of the reasons for creating the Trust – sometimes saying it was to avoid problems with probate and sometimes describing it as created as an asset protection scheme.
24. The Council says, however, that it did not have any evidence that at the time the Trust was created, Mrs X was in need of care and support. It also acknowledges that “at the time the decision was issued the Council was not in receipt of the necessary information to assess whether (Mrs X) would or would not have had an expectation of contributing to the cost of her care at the time the Trust was created”.
25. Mrs A says the Trust was created so that when she inherited the estate, any assets would be protected from shoring up her husband’s failing business.
26. The Council says the description of the Trust as an asset protection scheme, together with Mrs X’s age at the time, led it to consider that the creation was an attempt to remove the capital for future care charges. It says it therefore asked Mrs A for more information so the matter could be thoroughly assessed. Mrs A did not respond.
27. At the time of the Council’s decision Mrs X was already paying the full cost of her care home charges so she was not entitled to enter into a deferred payment arrangement.

The Council’s response: the nature of the Trust

28. Following my draft decision, the Council looked again at the ‘life interest’ Trust entered into by Mrs X. It says “A life interest trust is usually only created by a Will and it operates on death. Its purpose is to make provision for dependants without making an outright gift of the asset, which ultimately passes to other chosen beneficiaries. The trust cannot be created for yourself as you cannot hold things on trust for your own benefit… the settlor cannot be a trustee as well as a beneficiary of such a trust. The whole purpose of the creation of a trust is a separation of the control of an asset from the settlor to the trustees”.
29. The Council says however that in the case of this trust, Mrs X is listed as the settlor at clause 1, and at clause 2 she is also listed as a trustee of the trust along with her daughter, Mrs A. Despite one of the reasons given for the creation of the trust being to ensure that her primary asset (her home where she lived independently) was protected from her son-in-law’s failing business, her son-in-law, Mr A, is listed in the class of beneficiaries of the trust along with (the settlor) Mrs X and her daughter, Mrs A.
30. The Council goes on to say that for a valid trust to be created, it needs three elements:

Certainty of intention - the intention by the settlor to put a duty on the trustees to hold the property for the benefit of a certain class

Certainty of subject matter - the clarity of what asset is included in the trust.

Certainty of objects - the objectives of the trust should be clear.

If these three elements are not met, the trust is considered to be a "sham trust"…. intended to create the impression that they have created a valid trust “by purportedly transferring the legal title to property to the trustees and the equitable interest in the property to the beneficiaries but in reality, retaining ownership of the property with the assistance, knowing or otherwise, of the trustees.”

31. The Council argues there was no certainty of intention – because Mrs X as the settlor was also the transferee, a trustee and a beneficiary. It says the title document of the property at the Land Registry suggests that the property was held as tenants in common by the settlor, Mrs X, and her daughter, Mrs A, as co-owners rather than as trustees so there was no clarity of what asset was included. (“The restriction entered on the property is a Form A restriction to record a tenancy in common rather than a Form B restriction regarding a trust or a settlement. This suggests that there was no property transferred to the Trust Fund”). It says a trust over Mrs X’s main residence while she continued to use it was created for no clear purpose.
32. Finally, the Council says “By putting her daughter as a co-owner on the title of the property, Mrs X effectively gifted 50% of her property which made her more vulnerable.  Her daughter became the legal and beneficial owner of this share which put Mrs X at risk.  By holding the property in her own name, Mrs X would have suffered no risk from any turbulence in her daughter’s life or her son-in-law’s business.”
33. The Council’s view is that the creation of the trust served no real purpose except to avoid care fees.  Mrs X kept using the property as her main home and is also on the title as a legal and beneficial owner. “It is also the Council’s view that the trust is invalid in any case as Mrs X is named as settlor, trustee and beneficiary, and as information held by the Land Registry suggests that the property was not in fact transferred to the Trust Fund”.
34. Mrs A responds that there was no intention to create a sham Trust.

Analysis

35. According to the statutory guidance, Councils must consider three factors in reaching a decision:

was there a reasonable expectation of needing care?

was there a reasonable expectation of the need to contribute towards the costs of that care?

was avoiding care costs a significant motivation in disposing of the asset?

36. The Council has acknowledged it did not know the answer to the first two questions when it initially took the decision that deprivation had occurred.
37. However, the Council has subsequently considered further the Trust which Mrs X entered and obtained fresh legal advice. If there was no valid Trust created there was in fact no deprivation.
38. The Council was entitled to take the value of the property into consideration in the financial assessment.

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Final decision

39. I have completed this investigation on the basis the Council was not at fault in taking into account the value of the property in its financial assessment.

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Investigator's decision on behalf of the Ombudsman