Advisory Opinion 2020-001

Part 1611 Asset Screening for Household Goods and Personal Effects

QUESTIONS PRESENTED

  1. Do household goods and personal effects meet LSC’s definition of asset?
  2. Which household goods and personal effects count towards a grantee’s asset ceiling?
  3. Must a grantee ask for the value(s) of household goods and personal effects that meet LSC’s definition of asset, even if those items are exempt from attachment under state or federal law?
  4. Must a grantee ask for the value(s) of household goods and personal effects that do not meet LSC’s definition of asset?
  5. Must a grantee’s actual screening practices be consistent with the screening policy established by the grantee’s board of directors?

BRIEF ANSWER

  1. Some, but not all, household goods and personal effects meet LSC’s definition of asset.
  2. A household good or personal effect that meets LSC’s definition of asset counts towards the asset ceiling unless the item falls within an exception which is both expressed in 45 C.F.R. § 1611.3(d)(1) and reflected in the grantee’s asset policy.
  3. Yes. Even if the items are exempt from the grantee’s asset ceiling because they are exempt from attachment under state or federal law, the grantee must nevertheless record their value.
  4. No.
  5. Yes.

BACKGROUND

Legal Services Corporation (LSC) grantees must establish “reasonable asset ceilings for [applicant] individuals and households.” 45 C.F.R. § 1611.3(d)(1). “The intent of this requirement is that [grantees] are supposed to consider all assets upon which the applicant could draw in obtaining private legal assistance.” 70 Fed. Reg. 45547 (Aug. 8, 2005).

Neither Congress nor LSC prescribes dollar values for grantee asset ceilings.[1] LSC defines assets as “cash or other resources of the applicant or members of the applicant’s household that are readily convertible to cash, which are currently and actually available to the applicant.” 45 C.F.R. § 1611.2(d). Grantee asset policies may exclude from the asset ceiling only four categories of assets, one of which is “items which are exempt from attachment under State or Federal law.” Id. § 1611.3(d)(1).

The Northwest Justice Project (NJP) does not count toward its asset ceiling items exempt from attachment under Washington state law. LSC recently became aware that NJP does not ask applicants about household goods or personal effects during the asset screening process.

NJP provided LSC a detailed justification for why it does not require intake screeners to inquire into the value of household goods or personal effects. NJP states, as a background principle, that grantees have broad discretion to exclude or include specific categories of assets in their asset screenings: NJP understands the regulations to indicate what grantees may exclude, not what they must or must not include or exclude. Based on this understanding that it has discretion, NJP does not ask questions about household goods for three reasons. First, many needs-based benefit programs, such as Temporary Assistance to Needy Families (TANF), exclude household items, sentimental items, and hobby items from the applicable resource limits. Thus, NJP concluded that it is appropriate to exclude the same items from its own asset inquiry. Second, based on its experience serving clients, NJP has concluded that asking low-income applicants which items in their homes might be sold for cash is a sensitive topic, and thus is not conducive to a trustful attorney-client relationship. Finally, NJP stated that because the value of household goods and personal effects up to $19,500 is exempt from attachment under Washington law and NJP’s asset ceiling is $20,000, NJP does not need to ask applicants for the value of household goods and personal effects.

ANALYSIS

We are mindful of the burden that asset screening imposes on both applicants and our grantees. We are also supportive of our grantees’ efforts to build trustful attorney-client relationships. That said, our analysis here is necessarily governed by the LSC Act and LSC’s regulations and it is to those sources we now turn.

The LSC Act requires LSC to “establish guidelines to insure that eligibility of clients will be determined” based on various financial factors, including “the liquid assets” of the client. 42 U.S.C. § 2996f(a)(2)(B)(i). Neither the LSC Act nor its legislative history define the term asset. Nor does Congress enumerate examples of assets.

Absent any statutory definition, LSC defined the term asset and outlined specific exceptions through regulation. Assets are “cash or other resources of the applicant or members of the applicant’s household that are readily convertible to cash, which are currently and actually available to the applicant.” 45 C.F.R. § 1611.2(d). Grantees may exclude only four categories of assets from eligibility calculations:

  • A household’s principal residence;
  • Vehicles used for transportation;
  • Assets used in producing income; and
  • Other assets which are exempt from attachment under State or Federal law.

Id. § 1611.3(d)(1). LSC has expressly stated that this list of permissible exclusions is exhaustive, not illustrative.[2]70 Fed. Reg. 45551 (Aug. 8, 2005).

Determining whether the value of a household good or personal effect counts towards a grantee’s asset ceiling involves two distinct inquiries: (1) does the item meet LSC’s definition of asset?; and (2) if so, do any of the exceptions in 45 C.F.R. § 1611.3(d)(1) apply?

Intake screeners must ascertain the values of all items that meet LSC’s definition of asset even if, pursuant to a policy properly enacted under § 1611.3(d)(1), the values of some or all of these items are excluded from the grantee’s asset ceiling.

 (1) Do household goods and personal effects meet LSC’s definition of asset?

By LSC’s own definition, an item is not an asset unless it is a “resource [that is] readily convertible to cash, which [is] currently and actually available to the applicant.” 45 C.F.R. § 1611.2(d).

LSC’s regulations do not provide guidelines for determining when an item is “readily convertible to cash” or “currently and actually available to the applicant.” LSC has, however, stated that the asset policy contemplates “all assets upon which the applicant could draw in obtaining private legal assistance.” 70 Fed. Reg. 45547. Thus, an item qualifies as an asset only if it could “readily” be converted to an amount of cash sufficient to pay the fees of a private attorney. 

This conclusion is consistent with the asset policies of other federally-funded poverty relief programs. For example, much as the LSC Act requires grantees to impose asset ceilings for applicants, the Supplemental Nutrition Assistance Program (SNAP) imposes resource limits for “food stamp” benefit recipients. 7 U.S.C. § 2014. Congress has excluded from SNAP resource limits those “resources that, as a practical matter, the household is unlikely to be able to sell for any significant return because the household’s interest is relatively slight or because the cost of selling the household’s interest would be relatively great… A resource shall be so identified if its sale or other disposition is unlikely to produce any significant amount of funds for the support of the household.” Id. Congress made this decision because “[i]t serves no purpose to deny a household food stamps because of an asset whose disposition would be costly relative to its value and therefore would not yield the household any significant cash.” 16 Cong. Rec. H11848-04 (daily ed. Oct. 23, 1990) (statement of Rep. Hatcher).

Likewise, it serves no purpose to deny a household legal assistance because it possesses an item whose disposition would be costly relative to its value and therefore would not yield the household any significant cash to pay for private legal assistance. If an item is not available to be readily sold for sufficient cash to pay the fees of a private attorney, it is not a “resource [that is] readily convertible to cash which [is] currently and actually available to the applicant”, and thus not an asset, as defined by LSC.

In sum, household goods and personal effects are assets for purposes of determining eligibility for legal assistance under Part 1611 when they are both currently available to an applicant for legal assistance and are readily convertible to cash.

 (2) Which household goods and personal effects count towards a grantee’s asset ceiling?

If a household good or personal effect meets LSC’s definition of asset, its value counts towards the grantee’s asset ceiling unless the item falls within an exception expressed in both 45 C.F.R. § 1611.3(d)(1) and the grantee’s asset policy.

The relevant exception here is “assets which are exempt from attachment under State or Federal law.” 45 C.F.R. § 1611.3(d)(1). In creating this exception, “LSC has in mind assets that are excluded from bankruptcy proceedings or other assets that may not be attached for the satisfaction of a debt, etc.” 70 Fed. Reg. 45550 (Aug. 8, 2005).

NJP cites Washington state law in support of its understanding that certain household goods and personal effects are exempt from attachment such that NJP intake staff do not need to inquire into their value. Title Six of the Revised Code of Washington deals with Enforcement of Judgments. The relevant portion of the statute, cited by NJP, reads:

(1) [subject to specific exceptions], the following personal property is exempt from execution, attachment, and garnishment:

a. All wearing apparel… but not to exceed three thousand five hundred dollars in value in furs, jewelry, and personal ornaments for any individual.
b. All private libraries including electronic media…but not to exceed three thousand five hundred dollars in value, and all family pictures and keepsakes.
c. A cell phone, personal computer, and printer.
d. …

i. … household goods, appliances, furniture, and home and yard equipment, not to exceed six thousand five hundred dollars in value for the individual or thirteen thousand dollars for the community, no single item to exceed seven hundred fifty dollars

ii. Other personal property, except personal earnings… not to exceed three thousand dollars in value

(2) For purpose of this section, “value” means the reasonable market value…

Wash. Rev. Code § 6.15.010.

Thus, under Washington state law, household goods up to a certain dollar value and some, but not all, personal effects are exempt from attachment. Under LSC’s regulatory exception for assets exempt under state or federal law, NJP may permissibly exclude from its asset ceiling some or all of the items listed in the Washington statute, subject to the relevant dollar values in that statute. For example, NJP’s policy may exclude from its asset ceiling only $6,500 of the cumulative value of household goods owned by an individual or $13,000 owned by a community. If the cumulative value of an applicant’s household goods meeting LSC’s definition of asset exceeds the relevant value ($6,500 for an individual or $13,000 for a community), NJP must count the excess value toward the asset ceiling. As an additional example, because the Washington state law exempts from attachment only household goods with individual values of less than $750, if an individual household good is worth more than $750, NJP must count that value towards the asset ceiling.

As discussed above, the list of four exceptions from the asset ceiling is exhaustive, not illustrative. Thus, grantees may not create additional exceptions.[3] NJP’s creation of other exceptions, described below, is impermissible.

First, NJP states that its governing body considered the resource policies of the Temporary Assistance for Needy Families program (TANF) in deciding that NJP need not ask applicants about the value of their household goods and personal effects. TANF is a federally funded program that provides financial assistance to qualifying low-income families. See 42 U.S.C. § 601. It is not a program that governs bankruptcy or the satisfaction of debts. Thus, TANF is not a state or federal law that exempts assets from attachment. NJP therefore may not exclude assets excluded by TANF from its own asset screening policies on the basis of that existing regulatory exception. Additionally, LSC has previously specifically rejected a request to allow grantees to create a new regulatory exception for “assets which are excluded from other governmental programs for which the applicant is eligible.” 70 Fed. Reg. 45550-45551 (Aug. 8, 2005).

Second, NJP states it is not conducive to the attorney-client relationship to ask applicants for the “garage sale” value of their personal effects, referencing a question previously suggested by LSC. Although NJP is correct that LSC requires grantees to “…determine financial eligibility in a manner that promotes the development of trust between attorney and client,” it misunderstands the purpose of this regulation. 45 C.F.R. § 1611.7(a)(2). This regulation serves to clarify that a grantee need not “require an applicant for assistance to swear, under penalty of perjury, to the accuracy of [the financial information] provided.” 41 Fed. Reg. 51606 (Nov. 23, 1976). In other words, it is a guideline for interactions with applicants. It is not a legal basis to exclude questioning entirely about particularly sensitive assets. We appreciate that it may be emotionally or otherwise difficult for applicants to answer detailed questions about their finances during times of crisis, and that NJP experiences this difficulty first-hand. This difficulty, however, does not create a legal basis for grantees to exclude from their policies assets that are not within a category explicitly identified in 45 C.F.R. § 1611.3(d)(1).

(3) Must a grantee ask for the value(s) of household goods and personal effects that meet LSC’s definition of asset, even if those items are exempt from attachment under state or federal law?

Grantees must ask about all items that meet LSC’s definition of asset, even if their values do not count towards the asset ceiling due to a permissible regulatory exception. As discussed above, Washington state law exempts the value of household goods and personal effects up to certain amounts from attachment. NJP’s board may decide to create a policy excluding this value of household goods from its asset ceiling. To apply such a policy, NJP’s intake screeners would need to ascertain the cumulative value of an applicant’s household goods and personal effects that meet LSC’s definition of asset, and then determine if that number exceeds the statutory threshold. If the cumulative value falls below the Washington state attachment threshold, then the intake screener would exclude it from the asset ceiling. In such instances, the value should be recorded in the case file, but not included in the assets total. If the cumulative value exceeds the attachment threshold, then the intake screener must count the value above the threshold toward the asset ceiling. The intake screener may not assume that the cumulative value of an applicant’s household goods and personal effects that meet LSC’s definition of asset is less than the attachment threshold – the screener must ask. Furthermore, the screener must record the answer to that question, even if the answer is $0, pursuant to LSC’s Case Service Report Handbook (CSR). LSC CSR Handbook, § 5.4 (2017).

(4) Must a grantee ask for the value(s) of household goods and personal effects that do not meet LSC’s definition of asset?

Intake screeners do not have to assess the value of items that do not meet the definition of asset but may choose to do so if it simplifies the intake process. For example, some grantees have chosen to ask applicants a streamlined question such as: “If you were to sell all of your household goods and personal effects in a yard sale, how much would you get?” This question complies with LSC regulations, but the answer to it is likely overbroad because it will likely include the values of household goods and personal effects that do not meet LSC’s definition of asset. Therefore, a grantee might choose, instead, to ask a question more narrowly tailored to identify only those household goods and personal effects that meet LSC’s definition of asset. For example, a grantee might choose to ask: “Do you have household goods or personal effects that could readily be sold for cash to pay for a private attorney?”

In any event, intake screeners may not assume that an applicant does not have any household goods and personal effects that meet LSC’s definition of asset. The screener must ask, for example, one of the questions in the paragraph above.

(5) Must a grantee’s screening policy be consistent with its actual screening practices?

A grantee’s governing body must memorialize its chosen asset ceiling and policies and “implement screening procedures consistent with [these] policies.” 45 C.F.R. § 1611.3(a). Thus, if a grantee’s actual screening practices are not consistent with its screening policy, the grantee is not in compliance with the regulation.

NJP’s asset policy, as provided to LSC, indicates that “assets exempt from attachment or execution by state or federal law” are exempt from its asset ceiling. For clarity and ease of administration, NJP’s board of directors could amend the policy to more specifically state that $6,500 of an individual’s household goods or $13,000 of a community’s household goods are exempt from attachment under Washington state law, and thus do not count toward the asset ceiling. NJP management could then expand upon that language to state that intake screeners must ask each applicant for the total value of household goods that meet LSC’s definition of asset and count the amount that exceeds $6,500 or $13,000 toward the asset ceiling.

CONCLUSION

Some household goods and personal effects – those that are actually available to the applicant and can readily be converted to cash sufficient to pay for a private attorney – are assets, by LSC’s definition. Intake screeners must ask for and record the value of all such items.

Even though intake screeners must record the value of all assets, it is possible that the values of some assets will not count towards the grantee’s asset ceiling: If an asset falls within an exception that is both expressed in 45 C.F.R. § 1611.3(d)(1) and reflected in the grantee’s asset policy, its value does not count towards the asset ceiling.

NJP’s board of directors may adopt a policy that excludes from its asset ceiling the value of household goods and personal which are exempt from attachment under Washington State law. Under LSC’s regulations, NJP may not exclude household goods or personal effects from its asset ceiling because it is difficult or undesirable to interview applicants about these items or because these items are exempt from TANF’s resource limits.

RONALD S. FLAGG
Vice President for Legal Affairs and General Counsel
 
STEFANIE K. DAVIS
Senior Assistant General Counsel
 
KRISTEN E. SCHERB
Graduate Law Fellow
 

[1] Contrast with applicant income ceilings, which LSC requires grantees to set at 125% of the Federal Poverty Guidelines (subject to qualifying exceptions). 45 C.F.R. § 1611.3(c)(1). The LSC Act requires LSC to set its income guidelines in consultation with the federal Office of Management and Budget and the governors of the states. 42 U.S.C. § 2996f(a)(2).

[2] LSC rejected the requests of commenters to specify that the list was illustrative - “LSC continues to prefer to retain the approach in the current regulation in which the list of excludable assets is set forth in toto.” 70 Fed. Reg. 45551 (Aug. 8, 2005).

[3] During the rulemaking process for Part 1611, LSC rejected comments recommending LSC draft the rule to allow grantees to create additional exceptions, even in cases where the grantee would have a compelling reason to do so. 70 Fed. Reg. 45550-45551 (Aug. 8, 2005).