Deprivation of capital & housing benefit.

paulday

Hi everyone

Just after some advice regarding housing benefit.

My mum is a pensioner and currently receiving housing benefit. She was run over last year and the compensation claim is just about reaching conclusion. The solicitors have been saying that she should be receiving around £20k, which will take her over the savings limit for receiving housing benefit.

I've read all the posts on here about deprivation of capital, but have come across this on the HMRC site:

Deprivation of capital: introduction

People are not treated as having capital of which they have deprived themselves if:

• the capital is a payment made because of a personal injury to them and

• the payment is held on trust for their benefit1

they are also not treated as having the amount by which notional capital is reduced under the diminishing notional capital rule.


So was just wondering how this payment will affect her benefits as this is a payment which was made because of a personal injury.


Thanks in advance.


Paul

nannytone_2

yiu have to satisfy both points.

it has to be a payout for a personal injury AND has to be held in trust.

GlasweJen

The trust is usually set up for people who are severely disabled by accidents and it is done as part of the settlement, the money isn't put in trust after the settlement is awarded as that would be seen as deprivation of capital.

mazza1985

For housing benefit purposes, any savings your mum has over £10k will have an impact on pension credit and/or housing benefit. The first 10k is disregarded, then for every £500 over this allowance they will assume an income of £1 a week. So in your mums case, they will assume she has an income of £20 a week.

Because housing benefit is means tested, they will take £20 a week out of your mums housing benefit, and she will become liable to pay this herself.

WARNING!!!!!!!!!!!

Do NOT be tempted to spend the money quickly by means of getting rid of it so her benefit entitlement goes back quickly to how it was. Otherwise she could lose her housing benefit, as this counts as a type of FRAUD. However, is she has not decorated/carpeted the house for 20 years, needs a second hand car or mobility scooter etcThis would be the time to do it! Just be aware that the benefits agency may ask you to prove what you spent the money on!!!!

mazza1985

Sorry I need to correct myself. The adjustment is not with HB its with Pension Credit! Its too early this morning for me lol

viktory

mazza1985 wrote: »

Do NOT be tempted to spend the money quickly by means of getting rid of it so her benefit entitlement goes back quickly to how it was. Otherwise she could lose her housing benefit, as this counts as a type of FRAUD. However, is she has not decorated/carpeted the house for 20 years, needs a second hand car or mobility scooter etcThis would be the time to do it! Just be aware that the benefits agency may ask you to prove what you spent the money on!!!!

I would echo that - the deprivation of capital rules are very much being actioned. One of my customers at work is finding this out, very much to his cost.

Mojisola

paulday wrote: »

My mum is a pensioner and currently receiving housing benefit. She was run over last year and the compensation claim is just about reaching conclusion. The solicitors have been saying that she should be receiving around £20k, which will take her over the savings limit for receiving housing benefit.

Is there any reason why this money can't be put into a trust?

Compensation for injuries is often used for future needs that the person may have as a result of the accident which they wouldn't otherwise have. If the money is put in a trust, it can released by the trustees for specific needs as and when necessary.

allen35

This was taken from the merton Council website:

http://www.merton.gov.uk/advice-benefits/benefits/hb-ctb/benefitsclaim/hbctbsavings.htm#disregardedsavings

Notional savings and investments
In certain circumstances a claimant or their partner will be treated as possessing savings and investments that they do not in fact possess. This is known as notional capital and will be included in the assessment of HB and CTB entitlement.
Where we believe that a claimant or partner have deliberately deprived themselves of capital to qualify for HB or CTB, we will still include this amount in our assessment of HB or CTB. We must take into account the reasons why the money was spent and where the claimant is aged 60 or over we will never apply notional capital rules if the money has been spent on reducing debt or purchasing goods or services that are reasonable given their circumstances. For example, if a claimant aged 65 bought a new washing machine to replace and old one this would not be used as notional capital.


I'm sure someone can clarify this who works for an LA, would this be any kind of debt or just priority, not sure if this rule applys for debt with pension Credit

Sixer

OP: as noted, the payout will be counted as capital unless it's for personal injury AND is put into a trust. That's not an either or thing that you quoted: it must be both. And if your mum has it paid into a trust, she can only access it on the say so of the trust's trustees. So it's not a completely straightforward option.

paulday

Thanks for all the replies.

Have been searching around and have found an arrangement called a Personal Injury Trust which sounds as if it will do the job. Will get her to ask her solicitor about it on Monday.

Cheers

Paul

mazza1985

But if you lock into a trust unnessecarily they will still class it as capital deprivation. If your mum does not need appointeeship/poa then they will STILL count the capital and deduct off pension credit!
From the amount of compensation that has been issued its clear that your mum has not been injured enough to warrent a trust fund/appointeeship/poa.

Why don't you just spend some of it as suggested and accept the shortfall with benefits with the rest? Don't try and play the system because you will be shooting youself in the foot!

paulday wrote: »

Thanks for all the replies.

Have been searching around and have found an arrangement called a Personal Injury Trust which sounds as if it will do the job. Will get her to ask her solicitor about it on Monday.

Cheers

Paul