inheritance, mental health and disability/housing benefit

slartibartfast1

I have Grant of Probate and have to divide up some money including around £40000 to one of my brothers. He is on Disiability Allowance and receives housing benefit. His disability is due to a mental health problem.
Now of course if he receives this it will exceed the £16k limit and one or more of his benefits will be stopped.
I have tried to contact him by phone and email about this but I am getting no response.
I have contacted a friend of his and it seems that since hearing of this he has had a relapse and is back in hospital.
The assumption that people on benefits receiving large sums will be able to manage their financial affairs to pace this money out at the same rate as if they were receiving benefits is flawed. This assumes a degree of discipline and organisation. My brother can be at best be described as being in a chaotic state. Certainly not capapble of managing a sum of money like this over a couple of years.
So what to do?
If I hang onto the money and drip feed it to him I am party to a fraud.
While he could waive his right to this money, I believe the various agencies will assess him on the basis of him having received it.

The stress of contemplating managing this money has caused a deterioration in his mental health.

midnight_express

If he gave you Power of Attorney you could handle his financial affairs for him. But, the money needs to be in his name and declared to the relevent agencies. To do otherwise would be fraud. He will still be entitled to DLA.

Dunroamin

There's nothing to stop you drip feeding him the money as long as he's declared it and has stopped claiming any means tested benefits.

skintandscared_2

I'm not sure of the logistics of this, but couldn't something be set up whereby, say, he had a separate account which "drip fed" via standing order the amount he is used to receiving into his usual bank account, or paid the bills directly (which are currently paid by benefits). The benefits could be stopped until the separate account fell below the benefits threshold, and of course there would be a full paper trail available of exactly what the money had been spent on so there could be no suspicion of deprivation of capital. It would mean he could be self-sufficient for as long as that money covered his usual living expenses but he wouldn't have to actually do anything. Would that work?

rogerblack

First step is to work out what benefit he's on.
If he's on contributions-based ESA in the support group, or IB, then his benefit entitlement would not change, apart from CTB.

Unfortunately, it now gets messy.

Firstly - are you in Scotland?
Secondly - did the will make any special provision for his disability?
Unfortunately, as I understand it:
Capital is stuff you own you can sell, or stuff you can get through the courts and sell.

Assuming no special provision was made in the will.
He now has (or will have when probate finishes) capital.

If you arrange to put it in trust for him in some manner - or hold it for him - and he could in principle apply to the courts to get your division of the estate challenged, and get the money directly - then he may well be treated as if he has the money (notional capital).

If you held financial power of attorney over his affairs (I am unsure if this is the proper term) and were made an appointee by the DWP - this would somewhat simplify things - but it would not change the above facts.
He now has capital, whether actual or notional, and his benefits will stop.

Where this would be beneficial is if - for example - you pay him the money, and he puts 40000 on a 100:1 shot at the Grand National, or buys 8 tons of lemon drizzle cake - he may be treated as having intentionally deprived himself of that capital, in order to get (more) benefits.
This can mean that he's treated as if he still has the money (notional capital again).
If you were in control, then you could manage the money properly.

In principle, some of this could be ameliorated by appealing, and following the tribunals process - but this may take the better part of a year.

http://www.dwp.gov.uk/docs/dmgch52.pdf
Read and understand this document on capital and ESA (all other means-tested benefits are more-or-less similar).

And then consult a solicitor that knows about benefits!!!

If they don't know what 'actual capital' vs 'notional capital' is, or what the notional capital depreciation rules are - then you probably need one that will.

And for anyone in the position of leaving a sum of money to someone on benefits - again - consult a solicitor with a clue, and WRITE A WILL.

It is quite possible to setup a trust, so all of the money paid by it is essentially ignored by the benefits system, and the standard of living of the person is improved for some time, rather than simply being spent on essentials.

princessdon

Wow - How to stuff the tax payers! What about the moral route of

"If you have money you no longer need benefits" Or is it not a safety net anymore - Is it a right for some people?

Owain_Moneysaver

It does not need to be drip fed at the same rate as benefit; expenditure just has to be 'reasonable' and not 'with the aim of obtaining benefit'.

E.g. £40k new car not reasonable, £6k new car probably reasonable. (The actual rules would need to be checked.)

Does the recipient own his house? Using capital to buy a house is normally acceptable. However house ownership then brings its own responsibilities re maintenance etc.

Owain_Moneysaver

princessdon wrote: »

Wow - How to stuff the tax payers! What about the moral route of

"If you have money you no longer need benefits" Or is it not a safety net anymore - Is it a right for some people?

I think the intention is to ensure that the money is not mis-handled in a way that leaves the recipient with no money and no safety-net.

princessdon

"It is quite possible to setup a trust, so all of the money paid by it is essentially ignored by the benefits system, and the standard of living of the person is improved for some time, rather than simply being spent on essentials."



That isn't drip feeding - I read the post as it is too late now for OP but others do this. If I have read this wrong then I offer my apologies - but the way I read it was that it was how to keep benefits and money.

rogerblack

princessdon wrote: »

"It is quite possible to setup a trust, so all of the money paid by it is essentially ignored by the benefits system, and the standard of living of the person is improved for some time, rather than simply being spent on essentials."



That isn't drip feeding - I read the post as it is too late now for OP but others do this. If I have read this wrong then I offer my apologies - but the way I read it was that it was how to keep benefits and money.

To clarify.
This is not applicable to the OP.

However.
Many people choose to consider the impact of their will, in order to maximise the benefits seen by their inheritors, rather than it being taxed, or causing them cost.

This can be done by such methods as giving away gifts (to a certain value a year) prior to death, or giving large lumps of property, which if death does not occur for 7 years is a more efficient way than paying inheritance tax.

This is largely an issue only for the (comparatively) well-off.

Proper estate planning, if your inheritors are on benefits can greatly improve their life, rather than them essentially having to account for every penny you give them, and them having to live as if they were on benefits, or risk being held to have spent the money so they are entitled again.

YesWillMan

This is a perfect example where using a Disability Discretionary Trust in a will should have been used. Then the Trustees could have "drip fed" the brother and his benefits would have not suffered too much.

Declaring the inheritance and possibly the OP or someone else close to the brother being appointed under a Lasting Power of Attorney to look after his affairs would appear to be the route to go down, You could also set up a Trust for him but having the funds in the brothers name would be the safest route with someone trustworthy looking after them until benefits would need to be applied for again, which of course this person could orgsnise so there would still be some money left and it is not all gone.