The most recent update to the Charging for Residential Accommodation Guide in 1998 emphasises the importance for local authorities of good practice measures regarding the collection and verification of information, including cross-referencing with bank statements and building society passbooks as well as cross-checking with other agencies, banks or private pension funds.
It is clear, however, that not all local authorities have specific policies or procedures regarding gifts.
In the event of the local authority deciding to rely on regulation 25 and treating any gifted property as notional capital, the question arises as to what is the practical effect of that. In the case of Mrs Yule, which I discussed in an earlier column, the result was to transfer to her financial responsibility for her own care fees. In that case, however, it appears that had the local authority done nothing further, Mrs Yule could have remained in the nursing home.
This illustrates the problems of the whole area of notional capital and the weakness of the local authority's position. The local authority may not lawfully withdraw the service because fees are not being met and, in most cases, would have a contractual relationship with the care provider under which it must pay the agreed fee.
This means, in practice, particularly bearing in mind local authorities' limited resources on pursing legal action, the local authority will usually only take action if there is a realistic prospect of recovering fees. So, if the gifted assets have been used up or dissipated by the donees and the resident has no other assessable assets, there is little point in making a decision on notional capital at all.
It should be remembered that, unlike the remedy under section 21 of the Health and Social Services and Social Security Adjudication Act 1983, where assets can be recovered from third-party donees, this does not apply to regulation 25.
On the practical side, section 25 of the Charging for Residential Accommodation Guide states that if the resident has disposed of capital to avoid a charge, the local authority will need to decide whether to treat the resident as having the notional capital and to assess the charge payable accordingly. It must then decide whether:
It is realistic to attempt to recover the assessed charge from the resident, bearing in mind they may not have the means to pay the debt which will be accruing; or If the asset was transferred not more than six months before the date the resident began to live in the accommodation, to use the provisions of section 21 of the Health and Social Services and Social Security Adjudication Act 1983.
Where there is some prospect of direct recovery, the local authority may bring civil proceedings for debt. It should be remembered that, if the individual has residual capital of up to £16,000, there is nothing in principle to stop this capital from being considered available to meet care fees where civil proceedings are brought for debt recovery following a regulation 25 determination.
If the local authority obtains judgment against the individual for that recovery, it could force the resident into bankruptcy, so giving the trustee in bankruptcy the option of setting aside gifts made within two or five years under section 339 of the Insolvency Act 1986. In addition, the local authority could apply to court under section 423 of the Insolvency Act 1986 without bankruptcy proceedings and ask the court to exercise general discretion to set aside gifts or make other appropriate orders.
The burden would be on the local authority to show the gift was made for the purpose of putting assets beyond the local authority's reach. In practice, it is unlikely that the local authority would pursue action under the Insolvency Act except as a last resort.
The whole area of financial assistance with long-term care, while being of utmost importance to the individuals concerned, can be fraught with difficulties and individuals clearly need advice from professionals who are familiar with the process. Furthermore, since it appears there is no direct appeal from the local authority's decision, while the individual can always ask the local authority to review the decision, he or she cannot force it to do so It may be the only option for the individual would be to involve the local authority's own complaints procedure, make an application to the local government ombudsman or exceptionally (as in the Yule case) seek judicial review. The need for proper advice in such cases cannot be overemphasised.