Charging for Residential Accommodation Guide (CRAG)
The CRAG Report is a document sent to the heads of all councils in England and Wales explaining how to interpret The National Assistance (Assessment of Resources) Regulations 1992.
The CRAG report is a very long document, but one section in particular is important for the purposes of Estate Planning with particular regards to how property owned as Tenants in Common are valued for the purposes of means testing.
Firstly, a quick explanation of the term.
Normally, for a couple; property is registered at The Land Registry listing the names of both owners. The owners are referred to as Joint Tenants, and this is done for convenience. On the death of one owner, the surviving owner inherits the property automatically and instantly.
Whilst this is not problematic, there are benefits of severing this joint tenancy and becoming Tenants in Common. I.E. each owner is now assumed to own half of the property.
There are many good reasons for doing this, but let’s concentrate on one:
Means testing for carehome fees.
The laws governing this are cumbersome and open to misinterpretation, so the CRAG report should be used to administer the law.
We are particularly interested in section 7, which defines how to deal with property owned as tenants in common.
Below is the excerpt. I will translate from legalese to English.
Effectively, what this means is that if the property is owned as tenants in common, the property as a whole cannot be used for the purposes of means-testing, only the 50% owned by the tenant in question.
“the likelihood of there being a willing buyer”
In other words, the valuation must be based on the fact that it cannot be bought in its entirety. It is also worth noting that we add a restriction to the Title Deed stating that it cannot be sold without the agreement of the co-tenant. If the co-tenant refuses, it cannot be sold and therefore has no value.