denotes premium content | Jan 8 2009 Feature
posted 24 Jun 2005 in Volume 10 Issue 4
ECA course: Part 12
Protecting the interests of older clients
David Coldrick, partner at Wrigleys Solicitors, begins this next part of his ECA series with an examination of capital disregards, providing an introduction to the complex area, before looking in more detail at disregards related to the care-home resident’s dwelling.
Introduction to capital disregards under the National Assistance (Assessment of Resources) Regulations 1992 (NA(AR) Regs) means-test
The contents of the list of ‘Types of Capital’ contained within paragraph 6.002 of the mandatory Charging for Residential Accommodation Guide (CRAG) published by the Department of Health, contain some examples of types of capital that may constitute properly assessable capital.
But, even if those basic types of assessable capital have a value against which a means-test assessment might be made, they may still not amount to the properly assessable capital of the resident. They might fall within the ambit of capital to be disregarded.
Claimants for income support should be informed of relevant disregards, such as the disregard for personal-injury compensation which is paid into trust.
See the decision of the Social Security Commissioners CIS 600/1995. There is no reason why local authority revenue officers should not be under a similar duty. Unfortunately, this positive obligation does not appear to be taken seriously and local authorities sometimes appear to have scant regard for the existence of the disregards. Ignorance or policy? Who can be certain? But, it is no excuse.
NA(AR) Regulation 21 headed “Calculation of Capital” states:
- “The capital of a resident to be taken into account shall, subject to paragraph (2) be the whole of his capital calculated in accordance with this Part and any income treated as capital under Regulation 22;
- “There shall be disregarded in the calculation of a resident’s capital under paragraph (1) any capital, where applicable, specified in Schedule 4.”
Furthermore, CRAG paragraph 6.004 (English version) notes: “Capital of £12,250 or less is fully disregarded”. And, CRAG paragraph 6.005 notes: “Capital over £12,250 and up to £20,000 is taken into account in full for the purposes of calculating the resident’s tariff income from capital unless regulations specify otherwise.” Capital above the capital limit of £20,000 renders the resident a ‘full payer’. (Note: the figures for both England and Northern Ireland in 2004-2005 are as above. The Welsh thresholds for 2004-2005 are £13,500 and £20,500.) The Department of Health has announced that it will be increasing the capital disregard limits as of 4 April 2005. For residents in England, the new lower limit will be £12,500 (up from £12,250) and the upper limit will be £20,500 (up from £20,000). This represents an increase of 2.04 per cent and 2.5 per cent respectively, both below recent levels of inflation and well below the recent double-figures increase in house prices. The new limits will apply automatically to domiciliary home-care charges.
By comparison, the capital disregard limits increased last year by 2.08 per cent (to £12,250 from £12,000) and 2.56 per cent (to £20,000 from £19,500) respectively.
The rules governing the capital to be disregarded through the operation of NA(AR) Regs Schedule 4 apply to both assessments towards the lower capital limit and the capital limit. The capital disregards also appear to apply to both actual and ‘notional’ capital.
The author would suggest that capital up to the lower capital limit is not strictly ‘disregarded’ from assessment, as the CRAG paragraph 6.004 suggests. It is merely exempted from assessment. This is not the result of a specific exemption but simply because it is not relevant under the regulations. They pay no attention to capital below the lower capital limit. The use of the word ‘disregarded’ indicates that capital up to that threshold is first taken into account in the capital assessment and is then taken out of the assessment, whereas, because it is below the threshold, it can never be assessable capital to be taken out of assessment. Further, and more significantly, it does not fall within the definitions of ‘capital to be disregarded’ under NA(AR) Regs Schedule 4. Fortunately, whether or not capital up to the lower capital limit is truly either exempted or disregarded is generally a matter of semantics.
NA(AR) Regulation 21(2) and the CRAG highlights the importance of ‘capital to be disregarded’. If something that would otherwise amount to a resident’s properly assessable capital is disregarded, then it will not be taken into account in the means-testing calculations. For example, the value of the resident’s dwelling may be disregarded under NA(AR)Regs paragraph 2 of Schedule 4 if it is occupied by a specified relative. It is as though the dwelling owned by the resident did not exist. Some of the forms of disregarded capital are simple to understand, but other such capital requires a more detailed explanation.
To re-iterate, Regulation 21(2) of the NA(AR) Regs states: “There shall be disregarded in the calculation of a resident’s capital … any capital, where applicable, specified in Schedule 4”.
The NA(AR) Regs Schedule 4 is headed “Capital to be Disregarded”. It incorporates many of the Income Support (General) Regulations (IS(G) Regs) Schedule 10, and disregards some with and some without amendment. While the IS(G) Regs contain 66 forms of capital to be disregarded, the NA(AR) Regs include somewhat fewer but that is primarily as the circumstances addressed are likely to be different, rather than as a sign of a restrictive policy.
Some of the disregards are addressed below in relevant groups and some in isolation, but the adviser will wish to become familiar with them all. If the adviser can assist only one client in a working lifetime as a result of being aware of a more ‘obscure’ disregard, that knowledge will be justified.
A detailed examination of the disregards relating to the resident’s dwelling
The family home is often the most important asset the resident owns. If it is disregarded automatically, or if a local authority can be persuaded to disregard its value, then that property will be protected from the cost of care. The subject, therefore, merits detailed examination.
The disregard of the dwelling owned by the temporary resident: NA(AR) Regs Schedule 4 paragraph 1 NA(AR) Regs Schedule 4 paragraph 1 states the disregard (author’s comments in italicised square brackets):
“1. In the case of a temporary resident who is not a prospective resident, the value of one dwelling (and not more than one dwelling) from which he is absent [is disregarded] in circumstances where –
(a) “He is taking reasonable steps to dispose of the dwelling in order that he may acquire another dwelling which he intends to occupy as his home; or
(b) “He intends to return to occupy that dwelling as his home and the dwelling to which he intends to return is still available to him.
2. “In the case of a temporary resident who is a prospective resident, the value of one dwelling (and not more than one dwelling) in circumstances where he intends, on being provided in fact with accommodation under that Part of the act –
(a) “To take reasonable steps to dispose of the dwelling in order that he may acquire another dwelling which he intends to occupy as his home; or
(b) “To return to occupy that dwelling as his home; and the dwelling to which he intends to return is available to him.”
By way of explanation, NA(AR) Regulation 2 defines a temporary resident as “a resident whose stay is (a) unlikely to exceed 52 weeks, or (b) in exceptional circumstances, unlikely substantially to exceed that period” and a prospective resident as “a person for whom accommodation is proposed to be provided under Part III of the [National Assistance] Act’.
The word ‘dwelling’ will be examined in detail in this course when dealing with NA(AR) Regs Schedule 4 Paragraph 2 (the disregard of the resident’s former home upon entry into permanent residential care if it is occupied by their partner, a specified relative or other family member.)
Furthermore, CRAG paragraph 7.002 states: “The value of a dwelling normally occupied by a resident as his home should be ignored if his stay in residential care or nursing home is temporary and:
-
“He intends to return to that dwelling, and the dwelling is still available to him; or
- “He is taking reasonable steps to dispose of that property in order to acquire another more suitable property for the resident to return to;
- “Only one dwelling can be disregarded in these circumstances.
“NB: If the resident’s stay is initially thought to be permanent but turns out to be only temporary, the dwelling he normally occupies as his home should be treated in the same way as if he had been temporary from the outset.”
If a resident has any genuine chance of returning home then their dwelling should not be taken into account in assessing their capital. The likelihood or not of this return should be apparent from their ‘needs assessment’ and ‘written care plan’. These should be effected and issued for the older resident as part of the mandatory single assessment process guidance (Health Service Circular 2002/001: Local Authority Circular 2002/001). That in turn follows the principles set out in the National Service Framework for Older People (HSC 2001/007: LAC 2001/12). The overall aim is to avoid older people being rushed into permanent residential care as a result of an acute incident when, given time to recover, they could return home. That is even if they might need additional, community-based support to enable them to do that. The reasonableness of the prospect of being able to return home may be a matter for negotiation. It will often require the involvement of a solicitor to make out the case for a return that facilitates the disregard.
NA(AR) Regs Schedule 4 paragraph 1(a) above indicates that the resident’s dwelling must be ignored even if the temporary resident could not return to that specific property. That is so long as they can re-enter the general community by way of its sale and the purchase of another property.
If the sale of the temporary resident’s dwelling takes place and a new property is still being sought, or the purchase is yet to be completed, then the disregard for
the sale proceeds of the resident’s former dwelling for 26 weeks or longer, to facilitate the purchase of a replacement dwelling under NA(AR) Regs Schedule 4 paragraph 3, will apply. Assuming there is an element of value downsizing that disregard should also cover the reasonable cost of repairs and adaptations being taken from sale proceeds to permit the resident’s return to the general community. Furthermore, the disregard for personal possessions under NA(AR) Schedule 4 Paragraph 8 should be applied to disregard a reasonable amount for kitting out that property while the resident is still in temporary care. Other surplus proceeds will become assessable capital as soon as they become available to the resident. That is as soon as they hit the solicitor’s account on sale, subject to any secured loans and other interests in the property to be repaid and otherwise met from those proceeds. The process described may be complex and might require negotiation with the local authority, especially if it might take time for building work and special purchases to be completed.
The ‘NB’ in the CRAG paragraph 7.002 indicates that should a resident’s health unexpectedly improve, so that they can return to the general community, any capital assessment made upon the value of their ‘former’ dwelling should not only be cancelled prospectively but also retrospectively. This may result in a refund.
The disregard for temporary residence requires that the relevant dwelling still be available to the resident (that is, that they can go back and live there ‘as and when’). It is questionable whether or not a let property is truly available to the resident. Could they really interfere with the tenant’s right to ‘quiet enjoyment’ until the letting period ends? The pension-credit rules prohibit letting if the property is to be disregarded in such circumstances. It may therefore be wise to avoid letting the dwelling, even for a short time, if the resident is a temporary resident.
The 12-week disregard of the dwelling owned by the permanent resident: NA(AR) Regs Schedule 4 paragraph 1A NA(AR) Regs Schedule 4 paragraph 1A states the disregard as follows, with the author’s words in italicised square brackets:
- “In the case of a resident who becomes a permanent resident on or after 9 April 2001 (‘a qualifying resident’) in respect of the first period of permanent residence, the value of any dwelling which he would otherwise normally occupy as his only or main residence (‘his home’) [is disregarded] for a period of 12 weeks beginning with the day on which the first period of residence begins.
- “In the case of a qualifying resident –
(a) “Who ceases to be a permanent resident, and
(b) “Who subsequently becomes a permanent resident again at any time within the period of 52 weeks from the end of the first period of permanent residence, the value of his home for such period (if any) which when added to the period disregarded under sub-paragraph
(1) in respect of his first period of permanent residence does not exceed 12 weeks in total.
3. “In the case of a qualifying resident –
(a) “Who ceases to be a permanent resident and is not a person to whom sub-paragraph (2) has applied, and (b) “Who subsequently becomes a permanent resident again at any time after a period of more than 52 weeks from the end of the first period of residence, the value of his home for a period of 12 weeks beginning with the day on which the second period of permanent residence begins.
4. “In this paragraph ‘the first period of permanent residence’ means the period of permanent residence beginning on or after 9 April 2001 and ‘the second period of permanent residence’ means the period of permanent residence beginning at any time after the period of 52 weeks referred to in sub-paragraph (3)(b).”
There is a reference to this provision in the CRAG paragraph 6.028A, but this is expanded upon under the subheading “Disregard for the first 12 weeks of a permanent stay” in the CRAG paragraph 7.003(A): “In the case of a resident who becomes a permanent resident on or after 9 April 2001 the value of any dwelling which he would otherwise normally occupy as his only or main residence should be disregarded for the first 12 weeks of a permanent stay, subject to meeting the qualifying conditions which can be found in paragraph 12 of the Annex to LAC(2001)10. This may not be their first permanent admission to permanent residential care.”
The CRAG paragraph 7.003(B) states: “Where a person leaves residential care (where they have been living on a permanent basis), before the end of the 12 weeks and then re-enters on a permanent basis within 52 weeks they will be entitled to the remaining balance of the 12-week disregard. If a resident leaves permanent care then re-enters more than 52 weeks later, they will qualify for the disregard again.”
The responsibility of local authorities was extended in April 2001 to ensure that they made suitable placements in residential care for those assessed as needing it despite owning a dwelling. Formerly residents might have only had modest resources under the lower capital limit but still found themselves having to pay as a result of owning an empty property. That was also sometimes without any immediate prospect of the resident having money available from its sale. This was a worry and an embarrassment to many older people and their carers who were used to securing timely payment of bills.
It was also anomalous because the Department for Work and Pensions could disregard the value of the family home for at least 26 weeks if steps were being taken to facilitate a sale. The 12-week temporary disregard was instituted as a result of the recommendations of the Royal Commission Report (With Respect to Old Age) – March 1999. Twelve weeks still represents a relatively short time from becoming a permanent resident to an assumed completion of a house sale but it is an improvement.
The details of the disregard may indicate that the draftsman believed that the adviser to the older person might recommend their entering and leaving care on an endless cycle of 12-week disregards. The drafting prevents such care-home ‘surfing’. How practicable such surfing would be is questionable bearing in mind the supposed rigours of the single assessment process. It may also be the case that the draftsman was suspicious that some local authorities might allow a resident a one-off ‘lifetime’ 12-week disregard if it was not spelled out that this was available again, in full, after the expiry of 12 months from any preceding use of the disregard.
It is also worth being aware that if attendance allowance stops after 28 days into the 12 ‘free weeks’ of care created by the disregard, and the resident is a self-funder, it should recommence at week 13. This is sometimes overlooked.
David Coldrick is partner in charge of the Sheffield office of Wrigleys Solicitors. He an be contacted at david.coldrick@wrigleys.co.uk
