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Calculating a capital contribution

The Regulations provide that capital resources comprise of every resource of a capital nature, excluding the value of the applicant’s home and any tools of trade of an applicant.  An applicant whose disposable capital exceeds €100,000 is not eligible to obtain legal aid or advice, except in cases falling within section 28(5) and 5(a) of the Act.

The value of the applicant’s home is NOT INCLUDED in assessing the applicant’s disposable capital.
 

A capital assessment does not need to be carried out where the value of a person’s capital assets is below €4,000. If the value of a person’s capital assets is above €4,000, the capital assessment must be carried out. Furthermore, such a person may not have their application passported, even if they would otherwise be eligible for passporting. They must therefore complete a statement of income and capital.

Capital resources

The applicant must provide details of all capital resources including, for example:-

  1. Monies lodged, deposited or invested in a financial institution;
  2. Land, including details of:- the acreage; buildings; plant/machinery; and stock; and
    of any lease agreement.
  3. Property including, for example, other house, commercial property, sites, and provide details of any outstanding mortgage/charge, any monthly repayment figure and name of the lending institution.
  4. Stocks/shares including details of                               
    • the type of share/stock; and
      the name of the issuing company or institution.
    • Interest in a company, business or property owning body. This includes the exact nature of the interest; any financial benefit from the interest in the company or business; and, if so, a full set of audited accounts and balance sheet.
  5. Other capital resources, including details of all other items of a capital nature such as a car, boat, mobile home, etc. In the case of a car details of the make/model/year are required.

Stocks and shares

Stocks and shares are considered to include (but are in no way limited to):

  • Shares in a limited company (public or private)
  • Government bonds (this includes all NTMA State Savings/National Savings and Investments products other than a Post Office Savings Bank account).
  • Prize Bonds/Premium Bonds
     

However, money held in a Post Office Savings Bank account is a cash asset and treated the same as other savings on deposit in a financial institution.

Value of resources

An applicant who is the sole owner of a resource will be assessed on the full market value of the resource, while a joint owner is assessed on 50% of the value.

The current market value of each capital resource must be provided by the applicant.  The applicant’s estimate of the value should be accepted unless the asset has been blatantly undervalued. A formal valuation should not be required.

The value of an applicant’s home on any land that the applicant owns is to be excluded from the value of the land. A standard deduction of 10% of the market value of the capital resource (other than money) is allowed in respect of its realisation cost.

Disposable capital

Disposable capital is arrived at after making allowances for certain items that are deducted from an applicant’s capital.

Loans used to finance capital resources

For each asset other than money, a deduction is allowed in respect of any mortgages or other loans which were used to purchase the asset in question. In addition the amount of any charge registered against an asset may be deducted in the same fashion. Any other debts outstanding against an asset may also be included.

An applicant must provide the name of the lender and the amount of the loan/debt; the reason for the loan/debt; and the balance outstanding.

Legally enforceable debts which fall due within twelve months

This includes any debts which are due to be paid within the next twelve months, including any debts which are already outstanding and are due to be paid immediately. This might include Revenue arrears, arrears on bills that have gone to a credit control department, an overdraft in arrears, maintenance arrears, among others. The applicant must provide details of the debt. The Board has the right to ask for proof of the debt in the form of a demand for payment and/or threat of legal action.                 

How to treat other loans

For loans other than those used to finance the purchase of a capital resource, the Board may allow the cost of twelve months repayments of the loan. The applicant must provide details of the current repayment amount and the staff member should multiply this by twelve to ascertain the value of the allowance to be granted in respect of each loan.

For example, a person takes out a loan of €5,000 to pay back to school expenses. The loan is to be repaid at €100 per month. A person is allowed €100x12, i.e. €1,200, as a deduction from their gross capital. 

Procedure 4.2  - How to manually calculate the applicant’s capital contribution

EOS can do this for you.                                                                                                                                                                                      A capital contribution is payable only where the service provided includes legal aid.

The contribution is calculated as follows:-

  1. Calculate gross capital
    1. Enter the name of each capital asset (other than the family home, tools of the trade, and money) in the top half of the “Capital” side of the form.
    2. Total all the non-cash capital assets and insert opposite “Total Value”.
    3. Divide the Total Value figure by ten and insert this figure opposite “Less realisation 10%”.
    4. Deduct the Realisation 10% figure from the Total Value figure and insert this figure opposite “Non-cash subtotal”.
    5. In the bottom half of the Capital side of the form, enter the name of each bank account and the figure on deposit in each bank account.
    6. If the applicant as substantial cash on hand then enter this as if it were a bank account as “Cash on Hand”.
    7. Total all the cash assets and insert this figure opposite “Cash Subtotal”.
    8. Add the Non-cash subtotal and Cash subtotal together. This is the applicants Gross Capital
  2. Calculate the allowances
    1. List each loan outstanding against a capital asset and the amount outstanding.
    2. List each legally enforceable debt falling due to be paid within twelve months.
    3. For each loan the applicant has (which was not already listed under steps 2a or 2b above), multiply the monthly repayment by twelve and list these amounts under “Loan repayments over next twelve months”.
    4. Total all the figures entered in the Allowances column and insert this figure opposite “Total allowances”.
  3. Deduct the Total Allowances from Gross Capital. This is the applicant’s disposable capital.
  4. If the applicant’s disposable capital is €4,000 or less, the applicant’s capital contribution is ZERO.
  5. If the applicant’s disposable capital is between €4,001 and €54,000:
    1. deduct €4,000 from the client’s disposable capital.
    2. take 2.5% of the remainder
  6. If the applicant’s disposable capital is €54,001 or greater:
    1. deduct €54,000 from the applicant’s disposable capital:
    2. take 5% of the remainder
    3. Add €1,250 to this amount. (this is 2.5% of €50,000).

The statement of capital on the application form enables an applicant to provide details of any capital resources (other than the person’s home), of mortgages/loans, and of any legally enforceable debts.

Example:

Disposable capital                                €100,000
Deduct €4,000
€96,000
Deduct next                                          €50,000 @2.5% =          €1,250
€46,000 @5% =             €2,300
Total contribution                                                                      €3,550

Example 1:

Michael is a farmer. His wife has applied for a divorce. He applies to the Law Centre seeking legal services in connection with this.

His farm is jointly owned by him and his wife. This has been valued at €180,000, however, the auctioneer advises that €120,000 of this is due to the family home - in which Michael resides - and the agricultural land is valued at €60,000. There is a mortgage of €40,000 outstanding which he and his wife are jointly paying.

He owes a private solicitor €1,000 in professional fees in connection with a previous legal action. The solicitor has sent a fee note demanding payment.

He has a credit union loan of €4,800 to cover miscellaneous expenses, repayable at €200 per month for 24 months.  He has €1,000 shares (savings).

How to assess:

  1. Calculate Michael’s gross capital.
    1. The farm is valued at €180,000 however €120,000 is due to Michael’s home. Only assess the remaining €60,000 can be included in the assessment.  In addition, Michael’s wife has a contrary interest in the proceedings, only Michael’s portion of the farm is included, i.e.  50% share, €30,000. As this is a non-cash asset 10% realisation costs, a further €3,000 is deducted leaving €27,000.
    2. The shares in the credit union are a cash asset valued at €1,000. No realisation deduction is made for cash assets.
    3. Michael’s gross capital is his non-cash subtotal of €27,000 + his cash subtotal of €1,000 = €28,000
  2. Calculate Michael’s allowances.
    1. The mortgage on the farm constitutes a loan outstanding on a capital asset. Michael is responsible for 50% of the mortgage, €20,000 is allowed.
    2. The professional fees owing constitute a legally enforceable debt falling due to be paid with the next twelve months, he is allowed the full amount - €1,000.
    3. The credit union loan is not against a capital asset, so the total amount outstanding is not given as an allowance. Instead we give an allowance for the value of twelve months repayments. €200x12 = €2,400.
    4. Michael’s total allowances are €20,000+€1,000+€2,400 = €23,400
  3. To calculate Michael’s disposable capital, deduct allowances from gross capital. €28,000 - €23,400 = €4,600.
    The contribution is calculated as follows:
  4. The applicant’s disposable capital is greater than €4,000, but less than €54,000.
    1. There is no contribution on the first €4,000, so deduct €4,000 from the disposable capital to get the remainder (€600).
    2. We calculate the capital contribution at 2.5% of the remainder i.e. €15
    3. This is added to the legal aid contribution.

Example 2:

Jane is taking a personal injuries action. She lives alone and is not married. She owns her own apartment valued at €120,000 and also has a second property valued at €150,000 which is rented out. She owns a 3 year old Toyota Corolla 1.6l valued at €8,000. She has mortgages outstanding of €80,000 on her own apartment and €170,000 on her rental property, which is in negative equity. She also has an outstanding car loan of €2,000.

How to assess:

  1. Calculate Jane’s gross capital
    1. The apartment, in which Jane lives, is excluded from the calculation.
    2. She owns a second property valued at €150,000. She also owns a car valued at €8,000. Her total non-cash assets are €158,000.
    3. We deduct 10% realisation costs from non cash assets (€15,800) leaving gross capital of €142,200
  2. Calculate Jane’s allowances
    1. The mortgage on Jane’s own apartment is excluded from the calculation.
    2. The mortgage on her second property has €170,000 outstanding on it.  She has an outstanding car loan of €2,000. Her total allowances are therefore €172,000.
  3. As Jane’s allowances (€172,000) exceed her gross capital (€158,000) she has no disposable capital, and therefore is not liable for a capital contribution. 
     

Example 3:

John is married and taking a nuisance and personal injuries claim. He and his wife, Mary, jointly own the family home valued at €150,000. He owns a 5 year old Toyota Corolla 1.6l valued at €5,000. Mary owns a 3 year old Toyota Yaris valued at €5,000. They have savings in a joint account of €20,000. There is a mortgage outstanding on the family home of €20,000. John has a car loan of €2,000 outstanding and Mary has a car loan of €3,000 outstanding.

How to assess:

  1. For the purposes of this example, Legal Services, following consultation have given a direction that John and Mary’s means be jointly assessed, as it is a matter in which they have a joint interest in the proceedings.
  2. Calculate John and Mary’s gross capital
    1. The family home is excluded from the calculation
    2. The non-cash assets comprise two cars valued at €5,000 each, giving total non-cash assets of €10,000
    3. We deduct 10% realisation costs from non cash assets (€1,000) leaving a non-cash subtotal of €9,000.
    4. Next add the cash asset, i.e.  savings of €20,000. We do not make a 10% deduction from cash assets.
    5. John and Mary’s gross capital is non-cash subtotal (€9,000) + cash subtotal (€20,000)=€29,000.
  3. Calculate John and Mary’s allowances.
    1. The mortgage on the family home is excluded from the calculation.
    2. There are two car loans of €2,000 & €3,000 outstanding. The total allowances are therefore €5,000.
  4. Gross capital (€29,000) – allowances (€5,000) = Disposable capital of €24,000.
  5. The contribution is calculated as follows:
    1. We observe that the applicant’s disposable capital is greater than €4,000, but less than €54,000.
    2. There is no contribution on the first €4,000, so we deduct €4,000 from the disposable capital to get the remainder (€20,000).
    3. We calculate the capital contribution at 2.5% of the remainder i.e. €500.
      €500 is added to the legal aid contribution.

Example 4

Sarah is taking judicial separation proceedings. She and her husband jointly own the family home, worth €200,000, and have a joint share in a second property worth €200,000. Sarah lives in the family home, the second property is rented. Her husband lives elsewhere in rental accommodation. In addition, Sarah has savings of €30,000 and a car, a 2l Nissan Quasqai valued at €15,000. The mortgage on the family home is paid off; however, the mortgage on the second property is valued at €140,000, Sarah pays half of this mortgage. There is a car loan outstanding of €7,500.

How to assess:

  1. Calculate Sarah’s gross capital.
    1. The family home is excluded from the calculation.
    2. Sarah has only a 50% interest in the rental property, therefore we only assess capital on this at 50% of the value, i.e. €100,000. Sarah’s car is valued at €15,000. Her non-cash assets are €115,000.
    3. Deduct 10% realisation costs from non cash assets (€11,500) leaving a non-cash subtotal of €103,500
    4. Sarah’s cash assets are her savings of €30,000.
    5. Her gross capital is the non-cash subtotal of €103,500+her cash subtotal of €30,000= €133,500
  2. Calculate Sarah’s allowances.
    1. The mortgage on the family home is excluded from the calculation.
    2. Sarah is paying only 50% of the mortgage on the second property, therefore we allow her half the amount outstanding on that mortgage, i.e. €70,000. We also allow her the full amount outstanding on the car loan i.e. €7,500. This gives her total allowances of €77,500
  3. Sarah’s gross capital (€133,500) – her allowances (€77,500) = disposable capital of €56,000.
  4. We calculate her capital contribution as follows.
    1. Her disposable capital is above €54,000.
    2. There is no contribution on the first €4,000.
    3. The contribution on the next €50,000 is 2.5% of that amount, i.e. €1,250.
    4. We deduct €54,000 from her disposable capital (€56,000) to get the remainder, in this case, €2,000. We get 5% of this, €100.
    5. Her total capital contribution is her contribution on the first €4000 (zero) + her contribution on the next €50,000 (€1,250) + her contribution on the remaining €2,000 (€100) = €1,350.
  5. €1,350 is added to the legal aid contribution.