inheritence and benefits

zagfles

thorsoak wrote: »

how wonderful for your friend! He is very lucky indeed.

£20k is the equivalent of a year's good salary - and he will pay tax upon this sum if he invests it - although of course he will need to use it to cover his daily living expenses as he will not be entitled to benefits any more - and why should he - he is now a man of independant means!

I would suggest that he looks around at what he would want to be doing in say 5 years time - and then use this money (which is an unexpected bonus) to fund his journey to whatever point that may be - change of career, change of location (especially if as you say he is in a high unemployment area).

My advice would be to use this money carefully as the key to his future - independent of DWP and everybody else.

Agreed - but his problem is that he needs to be careful to ensure that he is not spending the money in a way which the DWP could interpret as deprivation of capital. For instance, in order to be able to look for jobs in other areas a sound investment might be a car (some jobs even expect you to have a car). So if he bought a car it could be a good investment in his future but the DWP might see it as deliberate deprivation of capital.

viktory

Arg wrote: »

No suprise to see the usual cretins thank your post.

Classy :cool:

calleyw

zagfles wrote: »

I did hear of a case where someone on benefits was initially due an inheritance but the beneficiaries got together and amended the will to pass her share directly to her (grown up) children who weren't on benefits. Apparently a will can be amended if all the beneficiaries agree and they are all of the opinion that it the new will would have better reflected the wishes of the deceased, quite often it's done to account for inheritance tax changes etc.

The above was Deprivation of capital you can do it but the DWP will still see you as having they money as it is seen as a gift.

The correct term is deed of variation.

I am amazed time and time again when people want to get rid of money so they can claim benefits.

Why no use it so that you don't have to struggle and then when you get back to the level of £16K or less start to re-claim benfits.

Yours

Calley

Jowo_2

Arg wrote: »

Perhaps because the vast majority of responses to them are bickering or unhelpful with a few better posts inbetween.
.

Perhaps because a lot of posters never bother to check for similar questions and assume that their issue is somehow unique?

I agree that the type of question being asked is subject, more than usual on this forum, to testy and unhelpful replies (including totally incorrect advice, too).

Also, obviously the OP has no idea that this same question is being asked almost every day here.

But the main thing is that Deprivation of Capital is a very complex area and investigations are done on a case by case basis by the DWP and HMRC. Their decision makers guide (staff manual) on this topic is huge and so its no wonder that the answers are going to be diverse.

Arg wrote: »

But it is possible to use the money wisely and not be penalised by the DWP is it not?

.

Yes, plus the DWP have to be able to demonstrate that the spending was done intentionally in order for the claimant to put themselves in a better position to claim means tested benefits.

And this is why I strongly advise (on a very regular and monotonous basis) that the affected party should find the DWP decision makers guide on the internet (and the HMRC one if they claim tax credits) and READ IT. That is the main official source of information and though it is aimed at benefit and tax credit staff, it does provide useful guidance on what they consider acceptable and non-acceptable spending.

zagfles

Jowo wrote: »

And this is why I strongly advise (on a very regular and monotonous basis) that the affected party should find the DWP decision makers guide on the internet (and the HMRC one if they claim tax credits) and READ IT. That is the main official source of information and though it is aimed at benefit and tax credit staff, it does provide useful guidance on what they consider acceptable and non-acceptable spending.

DoC isn't relevant to tax credits as there are no capital rules. There are "notional income" rules but they won't apply to inheritances of a lump sum, they apply to things such as not taking an income which is available (eg self employed trying to fiddle the system by being paid in "director's loans", salary sacrifice etc).

Indie_Kid

zagfles wrote: »

DoC isn't relevant to tax credits as there are no capital rules.

Surely it would be relevant because of the rules relating to the taxable interest and TCs?

zagfles

calleyw wrote: »

The above was Deprivation of capital you can do it but the DWP will still see you as having they money as it is seen as a gift.

The correct term is deed of variation.

I am amazed time and time again when people want to get rid of money so they can claim benefits.

Why no use it so that you don't have to struggle and then when you get back to the level of £16K or less start to re-claim benfits.

Yours

Calley

People tend to want their inheritance to benefit their family, not the taxpayer. Which is why they seek to minimise inheritance tax by structuring their will in the necessary way, and that's really no different to trying to minimise the benefits impact of an inheritance.

Certainly if I wanted to leave money to someone who was on long term means tested benefits, I'd ask them whether it might be better to leave the money to someone else (eg their kids/sibling), who could perhaps be trusted to "look after" them.

Jowo_2

zagfles wrote: »

DoC isn't relevant to tax credits as there are no capital rules. There are "notional income" rules but they won't apply to inheritances of a lump sum, they apply to things such as not taking an income which is available (eg self employed trying to fiddle the system by being paid in "director's loans", salary sacrifice etc).

Thanks. I can't say I understand DoC particularly well and I am fairly ignorant about tax credits but there are links relating to this topic on the HMRC website which are too lengthy for me to want to trawl through. There are definately references to inheritances as you've detailed.


http://www.hmrc.gov.uk/manuals/dmgmanual/html/1Dmgcont/01_0011_DMGCONT10.htm

zagfles

sh1305 wrote: »

Surely it would be relevant because of the rules relating to the taxable interest and TCs?

Who says you have to put the capital in an interest paying account? You could invest the whole lot in a growth unit trust where often the dividends are minimal and just pay the fees. Or some sort of zero preference shares type thing where there are no dividends.

You have to declare income over £300 but I don't think the notional income rules have ever been used against someone who got rid of their capital in an unapproved way just because it COULD have been used to provide a small amount of income. That's not what they are aimed at.

zagfles

Jowo wrote: »

Thanks. I can't say I understand DoC particularly well and I am fairly ignorant about tax credits but there are links relating to this topic on the HMRC website which are too lengthy for me to want to trawl through. There are definately references to inheritances as you've detailed.


http://www.hmrc.gov.uk/manuals/dmgmanual/html/1Dmgcont/01_0011_DMGCONT10.htm

Those are ancient! They talk about WFTC & DPTC, ie the tax credits which ran from about 1999-2003, these DID have capital rules. There's a lot of historic stuff on the HMRC site...