Normal spend versus deprivation of assets

Yorkshire_Midge

Was asked for advice on this by a mate of mine, but as I've never claimed benefits for anything in my life, I haven't got a clue so wondered if anyone else has?

The question is when does normal spend become "deprivation of assets" as far as benefit claiming is concerned?

Background:

His mother had ended up virtually on the bread line (don't know all the history but when her hubby was alive, they never seemed to have much then either) with just a few hundred quid savings, no pension provision and the only asset she had was her run down un-modernised pre-war semi. My mate has paid for a lot of essential work to be done on it over the years (we are talking tens of £thousands apparently, and I've seen it so I can see why) but it needed perhaps another £20-30K spending to get it fully sorted.

Common sense has prevailed and she has now sold it for someone else to finish doing up, and moved into a nice modern little flat to release some capital - and paid back the money spent by my mate on the old house from the proceeds. She also paid off some of her daughter's debts apparently (load of kids and credit card dept spirraling out of control - you know the sort of thing).

Don't know all the figures (seems a bit rude to ask), but knowing the area and given the state of her house even after the work done, I'd imagine the proceeds from downsizing won't have been much more than maybe £60-£70K, and moving into her flat will have incurred some expense too as she had hardly any possessions worth bringing if the truth be known.

So she is apparently still within the limit to continue claiming pension credit - but more importantly is in somewhere that isn't a financial black hole, and my mate has his cash back.

To me, this all seem OK - except my mate admits his records aren't that good and is concerned he wouldn't be able to evidence it adequately with receipts etc. if it was ever challenged, as it spans years. No idea whether he is overeacting or not.

NAR

First of all the money she gave daughter to clear debts will be seen as deprivation of assets.
Second your mate's payments is more of a grey area, but he would be expected, within reason, to justify the amount paid to him. For instance, has tax etc been paid on the amount your mate received?

Yorkshire_Midge

Thanks - I don't think the debts will be huge, and hense my question about the point at which normal spending of your own money becomes deprivation of assets. So for example, she could just as easily have decided that her flat needed some expenditure before moving in (like a new bathroom or kitchen) rather than helping out a member of the family.

On your second point, it sounds like an informal arrangement as you might well make with friends and family, so I doubt it but will ask.

atush

if your mate's mother paid him back what he Spent on the work (ie materials, contractors etc), not deprivation of assets (as was upkeep of the asset sold) but if she paid him a salary I am not so sure
(and of course if he did not delcare this as income he could be in trouble).

The debts paid for the daugther will be deprivation in all likelyhood.

xylophone

http://www.ageuk.org.uk/Global/Age-Cymru/Factsheets%20and%20information%20guides/FS53%20Capital%20income%20and%20means%20tested%20benefits%20April%202012.pdf

Repaying her son the money that he paid out would be fine I should think but he might well need to provide receipts/schedule of work done etc.
The money given to the daughter seems to me to be an outright gift and might be regarded as deprivation of capital?

Yorkshire_Midge

Atush - not any sort of business arrangement. Just paying for work on her behalf because she simply couldn't have afforded it while ever she remained in that house.

Xylo - that's a really useful link, thanks. I think this demonstrates my point though where it says "This might occur if you give money away to members of your family or buy expensive items in order to qualify for a benefit." That kinda implies there has to be deliberate intent and it doesn't sound like that at all here.

It also says that ‘reasonable’ spending on goods and services is OK, but what is reasonable? I guess it could be argued that her helping her daughter with some debts is actually reasonable so long as she doesn't do it specifically to get benefit and it isn't a silly amount of money.

NAR

I think the money spent on doing up the property will be seen as reasonable. Having before and after photos for evidence would be ideal. Also the more receipts as evidence the better.

Less than £1k gift to daughter again would unlikely to be seen as deprivation of assets, but say £5k (if it brought mum under the credit limit to get benefits) would definitely be.

Yorkshire_Midge

Thanks NAR - it's useful to understand the sort of sums of money that might trigger any problem.

sleepless_saver

A lot depends if she's in an Assessed Income Period for pension credit . Suggest she gets specialist advice as she may have an obligation to tell DWP about the change in capital.

Pedent

xylophone wrote: »

Repaying her son the money that he paid out would be fine I should think but he might well need to provide receipts/schedule of work done etc.

The money given to the daughter seems to me to be an outright gift and might be regarded as deprivation of capital?

Do you think?

It sounds to me as though the son paid for work to be done on an ad hoc basis over a long period of time without any expectation of repayment, and certainly without any formal agreement that he was making loans that would be repaid (the money may even have gone direct from the son to the contractor, and not via the mother).

If that's right, then because there was no debt to repay, this wasn't a repayment but a gift, just the same as the money given to the daughter.

Yorkshire_Midge

Sleepless Saver - I did ask him about AIP the other day, and he tells me his mother has been in an AIP for several years. I looked into this on the DWP page below, and it implies that a straight change to capital is not grounds to end the AIP early, and specifically states further down "because any increases to private pensions(other than normal yearly increases), annuity income (other than normal yearly increases), equity release payments and capital are ignored until the end of the assessed income period".

So unless I'm reading this wrong, it looks like she is fine until the end of the AIP, then may well loose the benefit if the work can't be sufficiently evidenced and/or the cash she gave away is fairly significant.

http://www.dwp.gov.uk/publications/specialist-guides/technical-guidance/pc10s-guide-to-pension-credit/assessed-income-period/

Pedent - I think you've hit the nail on the head. He may well be a victim of not formalising this to a sufficient level and it wouldn't surprise me if bills were settled directly, but I guess many people fall foul of this when dealing with family matters.