Summary: Mrs X complained the Council wrongly decided her mother had intentionally deprived herself of capital through gifts to family to avoid paying for care. We found fault in how the Council considered this, which caused doubt about the outcome of its decision making. The Council agreed to apologise, pay a financial remedy to Mrs X and her mother for distress, and reconsider its decision. It will also deliver training to its staff about deprivation of assets.

The complaint

1. Mrs X complains the Council wrongly decided her mother had intentionally deprived herself of capital through gifts to family to avoid paying for care. Mrs X says the Council did not provide an opportunity to explain the reason for the gifts or her mother’s motivation at the time. Mrs X further says the Council’s decision did not give adequate reasons in accordance with the Care and Support Statutory Guidance. Mrs X also raises concerns about poor and insensitive communication, including incorrect suggestions she misused the Enduring Power of Attorney.
2. Mrs X says this has caused her mother distress and the Council is pursuing her for care costs she cannot afford.

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The Ombudsman’s role and powers

3. 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 significant injustice, or that could cause injustice to others in the future we may suggest a remedy. (Local Government Act 1974, sections 26(1) and 26A(1), as amended)
4. We consider whether there was fault in the way an organisation made its decision. If there was no fault in how the organisation made its decision, we cannot question the outcome. (Local Government Act 1974, section 34(3), as amended)
5. We may investigate complaints from the person affected by the complaint issues, or from someone else if they have given their consent. If the person affected cannot give their consent, we may investigate a complaint from a person we decide is a suitable representative. (section 26A or 34C, Local Government Act 1974)
6. 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(1), as amended)

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How I considered this complaint

7. I considered evidence provided by Mrs X and the Council as well as relevant law, policy and guidance.
8. Mrs X and the Council had an opportunity to comment on my draft decision. I considered any comments before making a final decision.

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What I found

Legislation and guidance

Charging for care

9. The Care Act 2014 (section 14 and 17) provides a legal framework for charging for care and support. It enables a council to decide whether to charge a person when it is arranging to meet their care and support needs. Councils should also have regard to the Care and Support Statutory Guidance.
10. For residential care, when a council arranges a care home placement, it must follow the regulations when undertaking a financial assessment to decide how much a person must pay towards the cost of their residential care.
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 can get council support to meet their eligible needs. People who have over the upper capital limit must 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.
12. The term ‘capital’ includes things such as savings and investments, and can include the value of assets such as second homes and in the case of a permanent care home resident the house they previously lived in (although in some cases this may be disregarded).

Deprivation of capital

13. Deprivation of capital is when someone knowingly reduces the value of an asset they hold for financial benefit.
14. Regulations say a council can treat someone as ‘possessing capital’ if they find that person has ‘deprived themselves’ of it, ‘for the purpose of decreasing the amount they may be liable to pay towards the cost of meeting their needs for care and support’ (Care and Support (Charging and Assessment of Resources) Regulations 2014, Regulation 22).
15. The value of the capital the person has deprived themselves of is called ‘notional capital’.
16. For a council to treat someone as possessing notional capital it must therefore be satisfied both that they have:

• deprived themselves of an asset, and;
• have done so with the intent of reducing what they have to pay towards the cost of their care and support.

17. Annex E of the Care and Support Statutory Guidance sets out how councils should respond when they suspect someone has deliberately deprived themselves of assets to avoid care and support charges. 
18. The guidance says if deprivation comes to light when a council completes a financial assessment then it must treat the issue “with sensitivity and care”. Although councils have a duty to protect the public purse from fraud, the guidance warns against assuming someone has deprived themselves of an asset with the intent of reducing what they should pay towards their care and support. It says there may be valid reasons why someone no longer owns an asset and councils should “fully explore this first”.
19. We expect councils to make enquiries including obtaining a version of events from the user of services or their representative before making decisions on deprivation of capital. The council may also reasonably ask that person to provide supporting evidence for their account.
20. The guidance next goes on to give councils advice on how they should decide if deprivation has taken place with the intent of reducing care charges. There are three factors the guidance suggests a council must consider as part of its decision-making.

• The council should consider if the user of services ‘must have known that they needed care and support’
• The person must have had a ‘reasonable expectation’ they may need to pay towards that care and support at the time of the deprivation.
• The council should consider the timing of the disposal of an asset. This can help inform a decision about the person’s motivation for disposing of the asset.

21. We have produced guidance for practitioners about deprivation of capital which sets out how we investigate complaints about this issue. This says:
• we expect councils to make enquiries before deciding about deprivation of capital, including getting a version of events from the user of services or their representative. The council may also reasonably ask that person to provide supporting evidence for their account;
• councils should ensure they keep a clear record of the factors considered, weight given to evidence provided, and reasons for not accepting a family’s account about the motivation for the disposal; and
• councils need to avoid taking a blanket approach to gifting. Before deciding if someone has made gifts with the intention of avoiding care costs, councils need to consider issues such as:
1. the person’s life expectancy and overall capital when they made the gifts;
2. the size of the gifts relative to their overall capital;
3. the purpose of the gifts; and
4. historic patterns of gifting.
22. The Office of the Public Guardian (OPG) has issued guidance on gifting. This will be relevant to anyone appointed by the Court of Protection as a Deputy to manage the property and affairs of someone who lacks the mental capacity to do this for themself, and anyone given Power of Attorney by someone who has now lost the capacity to do this for themself. The OPG guidance does not apply to people who are still managing their own property and affairs.

Lasting Power of Attorney

23. The Mental Capacity Act 2005 introduced the “Lasting Power of Attorney (LPA)”. This replaced the Enduring Power of Attorney (EPA). An LPA is a legal document, which allows a person (‘the donor’) to choose one or more persons to make decisions for them, when they become unable to do so themselves. The 'attorney' or ‘donee’ is the person chosen to make a decision on the donor’s behalf. Any decision has to be in the donor’s best interests.
24. An attorney or donor must register an LPA with the Office of the Public Guardian before the attorney can make decisions for the donor.

Personal expenses allowance

25. Personal expenses allowance (PEA) is the minimum weekly sum that all users of services in residential care, whose care is funded by a local authority, should retain to meet expenses not covered by their care provider. There is therefore no basis to say someone funding their own care should keep their expenditure within the PEA.

What happened

26. The following is a summary of key events. It does not include everything that happened.
27. Mrs X’s mother, Mrs Z, moved into a care home at the end of June 2020. Mrs Z initially paid the care home directly for her care costs from her personal savings until her property was sold. Due to a delay in the property sale process, there was consideration of a deferred payment agreement but this was not progressed as the property sale completed in December 2020. Subsequently the Council made the payments to the care home and invoiced Mrs Z the full cost for her care.
28. Mrs X registered a 2003 EPA in August 2020 on the advice of her solicitor to allow her to deal with the sale of Mrs Z’s property during COVID restrictions.
29. Mrs X contacted the Council in August 2024 as Mrs Z’s savings were approaching the savings threshold. Mrs X completed and returned a financial information to the Council towards the end of August. The Council sought further information during September and visited Mrs X and Mrs Z at the care home towards the end of September 2024.
30. The Council completed a depreciation of capital calculation towards the end of October 2024. The calculation projected remaining capital of £187,953.43 and included the Council’s standard £2,000 annual discretionary allowance used to account for ordinary incidental expenditure in residential care (over and above the PEA).
31. The Council wrote to Mrs Z on 29 October 2024 with the outcome of its financial assessment above. The Council noted that Mrs Z’s capital assets had depleted much quicker than expected and it had determined she should still have assets to the value of £187,953.43. The Council confirmed that this meant Mrs Z would have to continue to fully fund her care. The Council included a copy of its depreciation of capital calculation and noted that Mrs X as Power of Attorney had a fiduciary duty to ensure Mrs Z’s finances were managed in her best interests and should be able to provide details of how Mrs Z’s capital has been spent.
32. Mrs X spoke with the Council on 6 November 2024. Mrs X explained that private medical costs contributed to the reduction in capital and advised that the family held a substantial amount of supporting documentation and receipts. A review meeting was suggested but was not progressed as Mrs X indicated she wished to obtain legal advice. Mrs X advised the Council on 21 November 2024 that a solicitor’s letter would follow.
33. The Council received a letter from the solicitor appointed by Mrs X on 17 December 2024 which noted the Council had not sought an explanation for Mrs Z’s expenditure outside of the PEA and had not had sufficient regard to the relevant Ombudsman’s guidance and statutory guidance. The expenditure was detailed as:

• £42,000 of personal expenditure for trips, clothing, toiletries and medical treatment
• £48,000 gifted to her grandson to support university studies
• £75,000 in gifts to her three children (£25,000 each) for a family holiday

34. The above letter also provided the family’s explanation that Mrs Z made the gifts because she believed she was nearing the end of her life. The letter stated that she was 88 years old at the time, had already spent approximately £170,000 on care fees since 2020, had survived the Covid 19 outbreak within the care home when many residents did not, and had also survived contracting Covid 19 herself in December 2020. The solicitor sought a review of the Council’s decision.
35. Mrs X’s solicitor wrote to the Council again on 13 January 2025 seeking an urgent response due to the anxiety the matter was causing Mrs Z and as her capital was now below the savings threshold. The solicitor explained they had advised the family to reduce the payment to the Council to Mrs Z’s income less her PEA.
36. The Council responded to Mrs X’s solicitor on 21 January 2025 to acknowledge receipt of their letters of 17 December 2024 and 13 January 2025 and apologised for the delay in responding. The Council set out the details of its financial assessment and diminishing capital calculation. The Council sought evidence for private medical costs for further review, an invoice for hearing aids to deduct this cost from the capital starting balance but advised the £48,000 gifted to Mrs Z’s grandson for assistance with university costs would not be deducted from the capital figure and would be included as notional capital in the financial assessment. The Council set out it had considered Mrs Z had been resident at the care home from June 2020 and was aware of the need to contribute to the ongoing cost of her care at the time of the gift being made which was in accordance with the Ombudsman’s guidance. The Council said this rationale would also apply to the lump payments of £25,000 made to each of Mrs Z’s three children as a gift for holidays totalling £75,000 which would also be classed as deprivation of assets and included as notional capital in the financial assessment. The Council provided an explanation about PEA but stated it had also made an additional discretionary annual allowance of £2,000 within the diminishing capital calculation to take into account other expenditures a person may make from their capital whilst in permanent residential care. The Council considered Mrs Z had a reasonable expectation of ongoing need for care and support and of the need to contribute to her eligible care needs at the time her capital was gifted and had concluded there had been a deprivation of assets and so treated this as notional capital for the purposes of the financial assessment in line with the relevant statutory guidance.

37. Mrs X’s solicitor wrote to the Council on 10 February 2025. This letter set out the history of Mrs Z funding her own care and so there was no basis to say she should have kept her expenditure within the PEA. The solicitor also referred to Mrs Z’s history of gifting before entering the care home and asked the Council to reconsider its decision about the gifts to her grandson and children in the light of this information and a previous Ombudsman decision. The solicitor also provided the following evidence:

• private medical expenses of £2,200, £150 and £2,850
• £1,795 cost of hearing aids

38. The Council wrote to Mrs X’s solicitor on 27 March 2025 and noted it had not received their letter of 10 February 2025 until a copy was provided on 19 March 2025. The Council apologised for the delay in receiving and responding to the earlier letter. The Council reaffirmed the deprivation decision with reference to the foreseeability test and confirmed that additional evidence remained outstanding to allow a full review.
39. Mrs X’s solicitor wrote to the Council on 12 May and apologised for the delay. The solicitor noted they had already provided the Council with evidence as set out above and reiterated the Council had incorrectly applied PEA as Mrs Z was self-funding and had not properly considered her motivation when making the expenditure or treated the issue with sensitivity and care. The Council again sought a review of the Council’s decision.
40. The Council sought specific bank statements from Mrs X’s solicitor on 15 May 2025. I have seen no evidence this particular information was requested before this date.
41. The family made a formal complaint to the Council on 19 June 2025. The Council wrote to Mrs X’s solicitors on 8 July 2025 to advise it was unable to investigate the complaint until it had received the previously requested bank statements. Mrs X’s solicitor wrote to the Council on 16 July 2025 to say this was unacceptable and that the bank statements did not address the issues raised.
42. The Council provided a response to Mrs X’s solicitor about the complaint on 24 July 2025. The Council noted it had applied an additional allowance of £2,000 per annum as standard practice without seeking evidence of expenditure but Mrs Z’s capital had decreased more than £2,000 per annum. The Council accepted it should have requested additional evidence at the point it completed the depreciation of capital calculation in October 2024 to demonstrate how funds had diminished rather than simply stating Mrs Z had the means to self-fund. This issue had been addressed with the financial assessment team to ensure this is always done in cases where capital had depreciated faster than expected. The Council noted it had sought evidence to support medical and personal expenses in its letter of 21 January 2025 to further review the depreciation of capital calculation. It should be noted this letter had only sought private medical expenses evidence. The Council had determined that gifts to family members of £123,000 which represented 45% of the proceeds from the sale of Mrs Z’s property were excessive and were not reasonable or proportionate expenses in the context of Mrs Z’s foreseeable care needs. Therefore, they were treated as deprivation with the rationale set out in its letters of 21 January 2025 and 27 March 2025. The Council referred to Mrs X’s responsibilities as a registered Power of Attorney with regards to gifting. The Council noted it aimed to maintain a professional tone but this could feel impersonal and would share this feedback with the team. The Council confirmed that sufficient evidence had not been provided to date to enable a review and that it had sought bank statements which had still not been provided in full. The Council required this information to understand the pattern and frequency of previous gifting to establish if there was any change to its decision and would review the financial assessment further if this information was provided. The Council set out the outstanding information. I have seen no evidence that the specific information requested here (and on 15 May 2025) has been provided by Mrs X.
43. Mrs X complained to the Ombudsman at the end of August 2025. Mrs X says that between 30 June 2020 and 28 December 2024 Mrs Z paid £175,141.10 for her care through payments direct to the care home for the first four months and subsequently via the Council. Mrs Z reduced her contribution after this date on the advice of their solicitor as her savings had fallen below the threshold. Mrs X says the Council has repeatedly claimed they have funded Mrs Z’s care since November 2020 to justify applying the PEA which contradicts the Ombudsman’s guidance on applying PEA limits to self-funders. Mrs X also says the Council has not provided reasons for including the amounts of £48,000 for assistance with university costs and £75,000 to other family members as notional capital and has not sought an explanation or dialogue with the family. Mrs X says the Council has not properly considered Mrs Z’s motivation in disposing of her assets in accordance with the Ombudsman’s guidance. Mrs X also says the Council had implied she misused the EPA. Mrs X says she has only acted as EPA for Mrs Z in respect of her property sale and Mrs Z has and maintains capacity to make all decisions about her affairs with Mrs X acting as an administrator only.

Council response

44. In responding to the Ombudsman, the Council provided the following information:
45. The disposals determined as deprivation of capital are as follows:

• £75,000 gifted to family members for holidays. Dates were not provided by the Attorneys. These were significant, non customary gifts, inconsistent with Mrs Z’s ongoing and foreseeable care needs.
• £48,000 gifted to a grandson for university fees. Dates were not provided. Such gifts usually require Court of Protection approval, which we have not had sight of, and were considered unreasonable given Mrs Z’s established and ongoing care and support needs.
• These gifts, totalling £123,000, represented approximately 45% of the proceeds Mrs Z received from her share of the proceeds of the sale of her property and the gifts were made at a time when she had a reasonable expectation of the need to contribute towards ongoing care services.
• The total amount determined as deprivation of assets in relation to gifted expenditure was £123,000.
• The Council has not treated the claimed £42,000 in medical and personal expenditure as deprivation because the evidence needed to consider whether deprivation of assets has occurred has not been provided, however this is still included in the financial assessment outcome as notional capital as it is unaccounted for expenditure.

46. The Council acknowledged that further evidence should have been requested sooner and that this had been addressed internally. The Council confirmed it remained willing to review the financial assessment outcome, once all required documentation was supplied, to ascertain whether there was any change to the decision with regards to the level of deprivation that has occurred.
47. The Council acknowledges that the depreciation of capital calculation sheet includes a line referencing PEA. This reference appears within an internal forecasting model used by the Financial Assessment Team to estimate how long an individual’s capital may last.
48. However, the Council has confirmed the following:

a) Mrs Z remained a self funder throughout the period in question - although the Council administered payments to the care provider, this did not constitute local authority funding, although these payments to the provider in respect of Mrs Z’s care do represent a commitment from the Council’s Adult Social Care budget. Accordingly, the statutory PEA did not apply to Mrs Z’s financial assessment, and the Council did not use the PEA when determining her liability for care charges or as a basis for the decision with regards to deprivation of assets.

b) Why the PEA appears in the depreciation of capital tool - within the Council’s internal modelling spreadsheet, the PEA is included solely as a benchmark for essential personal spending when estimating likely capital reduction over time. Its presence in the tool does not mean the PEA was applied to the assessment or that it formed part of any charging calculation. It is a forecasting input only, used to ensure the Council does not underestimate a person’s ordinary personal expenditure when projecting future capital levels.

c) Use of the £2,000 annual discretionary allowance- in addition to the PEA benchmark within the forecasting tool, the Council also applies an internal annual allowance of £2,000 to reflect incidental personal expenditure by individuals living in residential care. This allowance is used for forecasting only and does not relate to the statutory PEA or to charging.

When assessing or reviewing a person’s capital, if their spending exceeds what we would normally expect to see for someone in residential care, that is, expenditure above the equivalent of the PEA plus £2,000 per annum, the Council will request further information and supporting evidence. This is because unusually high or unexplained spending may indicate financial vulnerability. As part of our duty of care, we are required to seek clarification where a person’s finances appear inconsistent with expected patterns, and where appropriate we will take necessary steps to safeguard the individual.

The Council will always query a significant decrease in a person's capital, even if it was not material to the financial assessment outcome, for example, capital held below the lower threshold, where no tariff would be applicable, this would be to ensure that there are no safeguarding concerns with regards to the person's finances, and if safeguarding concerns were identified following review, appropriate steps could be taken to support the person and remove the risk.

d) Neither the PEA nor the £2,000 allowance formed part of the deprivation decision

49. The deprivation of assets decision was based solely on the scale and nature of the gifts totalling £123,000, Mrs Z’s established and long term residential care needs, the reasonable expectation that she would need to contribute towards the cost of ongoing care services, and the statutory rules governing the actions of Attorneys. The reference to PEA in the depreciation of capital calculation spreadsheet did not influence the deprivation decision, nor did it affect the treatment of Mrs Z’s financial liability.

Analysis

50. It is not the Ombudsman’s role to decide whether or not there has been a deprivation of capital. That decision is for the Council. Where we have identified fault in a decision, we may recommend reconsideration of the decision without the fault identified.
51. In carrying out a financial assessment of Mrs Z, the Council identified her capital had reduced much more than expected. It was therefore reasonable for the Council to consider whether there had been a deliberate attempt to avoid care charges.
52. However, as the guidance says, people are free to spend their income and assets as they see fit, including making gifts to friends and family. Councils should not automatically assume a deprivation of assets. There may be valid reasons someone no longer has an asset, and a council should ensure it fully explores the circumstances before drawing conclusions.
53. A council must consider three main questions when deciding if a person has deprived themselves of assets. This is whether a person has a reasonable expectation of needing care, a reasonable expectation of needing to contribute towards the cost of care and whether avoiding care costs was a significant motivation in disposing of an asset. A council should not be deciding a person has deprived themselves of assets without suitable justification as a person can dispose of an asset without this being a deprivation.
54. There is not enough evidence the Council properly considered its decision making or fully explored the reasons for Mrs Z’s expenditure including her gifts to family. The Council first decided there had been a deprivation of assets when it completed the financial assessment in October 2024. It did not make enquiries with Mrs Z and her family before this decision, to get a version of events or explore the motivation of the gifts. It also only explained this decision to Mrs Z by saying her capital had reduced quicker than expected and so she would need to continue to fund her own care. This explanation was not good enough, or in line with guidance. This was fault.
55. Following contact from Mrs X’s solicitor and a request for a review of the Council’s decision, the Council did consider the first two questions. The Council set out the rationale for its view that Mrs Z had a reasonable expectation of needing care and of needing to contribute towards the cost of her care. However, there is insufficient evidence the Council applied itself to the question about motivation. This gap in decision making was fault.
56. In subsequent correspondence, the Council did not clearly explain its views about Mrs Z’s motivation and why it did not consider the explanation provided was enough to show the intention was not to avoid care charges as required by the guidance.
57. On balance, I consider these faults by the Council bring into question the outcome of its decision making about deprivation of assets. This led to uncertainty for Mrs Z which caused her distress. Mrs X was also caused distress by the Council’s unclear decision process and delay. The Council should remedy this injustice with an apology and financial remedy.

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Action

58. Within one month of our final decision the Council will:
1. apologise to Mrs X and Mrs Z for its failure to properly consider and evidence why it considered Mrs Z’s expenditure was to avoid care charges; and
2. pay Mrs X and Mrs Z £150 each to recognise the distress caused by its unclear decision process and delay.
59. Within two months of our final decision the Council will:
1. reconsider its deprivation of assets decision by different officers with no prior involvement in the case – this should include consideration of any evidence the Council decides it still needs from Mrs Z and/or her family and allow them an opportunity to submit any additional evidence or explanation;
2. provide Mrs Z with a properly reasoned decision, showing what evidence it has considered and the weight given to the evidence, in line with the statutory guidance;
3. if the outcome is different (more favourable for Mrs Z), the Council should recalculate her financial assessment to determine the date her capital fell to the funding threshold and backdate funding provision accordingly; and
4. deliver training to relevant staff about Annex E of the Care and Support Statutory Guidance, and what the Council needs to consider when it suspects someone has deprived themselves of assets to avoid care and support charges.
60. We publish guidance on remedies which sets out our expectations for how organisations should apologise effectively to remedy injustice. The organisation should consider this guidance in making the apology I have recommended in my findings.
61. The Council should provide us with evidence it has complied with the above actions.

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Decision

62. I find fault causing injustice. The Council has agreed actions to remedy injustice.

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Investigator's decision on behalf of the Ombudsman