Sudden Riches

Some time ago I wanted to give advice to a disabled claimant who had received a lump sum from a compensation claim and was concerned about the effect of spending this money with regard to the deprivation of capital rules. I wrote to the DWP and the reply I received is available here.
Deprivation of Capital

Could I use this to pay off my mortgage?  

No because as far as the DWP are concerned you should only redeem debts that you are legally required to redeem otherwise you should only pay the minimum monthly payment as required paying more that the minimum required on a credit or store card debt would be regarded as "deprivation of capital"

Would the SS then treat me as having spent a load of money that I should still own?

Yes if they decide that you have intentionally spent money with the purpose of taking advantage of the benefit system then your benefit would be reduced. They have a system for reducing the capital at a rate commensurate with your benefit entitlement so a lump sum of £75000 would keep you off full benefit for ages.

If the money you inherit was paid by your their solicitor directly to the mortgage provider and you didn't have any choice in the matter then that would be a different matter. The DWP would then simply cease payment of the interest payments and your benefit would continue as before. The amount of savings or capital you are allowed to have and still get full benefit is in the back of the guide Social security benefit rates (GL23)

You are allowed to have tangible assets, so the gift of a car or caravan wouldn't have to be declared but if you were given the money to buy these items and the money appeared on your bank statement then the DWP would decide, even if the money was given for that specific purpose that it was for the period it was in your control actually your money and your first priority is to get yourself off benefit so if you spend it as directed by the giver, you would be in trouble. It might be different if you were disabled and the money was for an aid or treatment not available on the NHS. In these circumstances you could plead that healthwise you had no choice. One case where a claimant with Seasonal Affective Disorder, took herself of to Over-Winter in a sunnier climate and found this wasn't regarded as medically necessary but Intentional Deprivation so a bad situation was made worse.

I have modified my previous post as  once the money is in your solicitors hands it would be in your control and he would be acting in your place.

If they arranged with their executors certain actions regarding the distribution of their estate then that wouldn't be in your control and therefore you couldn't be held to be seeking to gain from the benefit system.  I think however you should get legal advice about the situation if you were acting as their executors. As you're on Income Support you could Call 0845 345 4 345 for legal help and advice for free, weekdays 9-5.
See CLSDIRECT

It would be of interest to others if the results of your legal consultations were posted back here for future reference.

Yes it would be interesting to see what the legal situation is. Of course if the house was sold while you are on benefits, you would then have capital and not be elligible for any of the means tested benefits. It would depend why you are on benefits and how long you might be on them, for instance if you are on Income Support because you care for children and when they get older you are no longer entitled to IS but have to claim Jobseekers Allowance, would the situation be exactly the same? Or if you are on Income Support because of illness because you are not entitled to Incapacity Benefit, again is this likely to be an on-going situation and what would the consequence be in the future? It seems like an awkward situation where if you sold the house you would never get anything from the money if you were on benefits at that time. You could try to find out more information about "gifts" and capital and what is allowable. Ted has already mentioned a car and caravan as being allowable (as long as you don't actually receive the cash to buy them), you might be better off receiving gifts such as these than having all the eggs in one basket so to speak if you are likely to be relying on benefits long term.

Hi babyling,

As you are on DLA, perhaps you have a local help centre that could also advise you or one of the national organizations relating to your disability?

Hope you get something sorted out, it seems like a complicated one!

Gaah - this is the first I've ever heard of "intentional deprivation" - I think that stinks.

To my way of thinking, it's perfectly reasonable to pay off a mortgage in full if you get an inheritance, so you don't keep paying the interest. Normally, the equity in your home is not counted for the purposes of means-tested benefits, but I guess the "intentional deprivation" rule means they can make exceptions.

How often are the "intentional deprivation" rules enforced? I bet it doesn't happen often. Otherwise, you'd read about it in the papers more.

I'd say pay off the mortgage anyway. If the DSS throw the "intentional deprivation" rules at you, then remortgage again - I think you're very unlikely to end up worse off than you are now.

Be a bit more cautious if you have to pay an early redemption penalty to clear the mortgage.