what is the thinking behind ESA and savings?

damino

rogerblack wrote: »

If a properly configured trust was setup first, or in the parents will, they can have access to the money to pay specific bills without it affecting any means tested benefit.
This cannot be done after they've inherited.

Who would be the people to talk to regarding setting up such a trust and details regarding it?

ta

rogerblack

damino wrote: »

Who would be the people to talk to regarding setting up such a trust and details regarding it?

ta

A lawyer with an understanding of benefits law, and the income rules surrounding it.
In general, it would be required that 'you' have no access whatsoever to the money - you cannot legally withdraw it, even if you really want to.
It can only be used for payment of specific expenses.

Inheritance tax planning is an area most lawyers are familiar with.
Benefit 'tax' planning of inheritors is not.

Pineapple88

damino wrote: »

Though still then a person with 16100 savings is a lot better off than a person with 15900, as the 16100 person still gets full ESA. Is that right?

The person with £16,100 may only be better off if they have enough contributions to qualify for contributions based ESA. If they did they would have their ESA plus £16,100 savings but if they did not qualify then they would only have their £16,100 savings to live off until they fell below the £16,000 mark and then they would be reassessed on income based ESA and receive a small amount.

The person with £15, 900 savings with qualifies for a small amount of ESA, HB and CTB. I haven't worked out the figures but the difference between what they get and what the person with £16,100 gets may only be small.

damino

Pineapple wrote: »

The person with £16,100 may only be better off if they have enough contributions to qualify for contributions based ESA.

i'm no expert but from what i've been told, and could be wrong, but apparently you qualify once your savings are that.

Pineapple wrote:

The person with £15, 900 savings with qualifies for a small amount of ESA, HB and CTB. I haven't worked out the figures but the difference between what they get and what the person with £16,100 gets may only be small.

Be interesting if you or somebody can show how that can be.

antrobus

rogerblack wrote: »

A lawyer with an understanding of benefits law, and the income rules surrounding it.
In general, it would be required that 'you' have no access whatsoever to the money - you cannot legally withdraw it, even if you really want to.
It can only be used for payment of specific expenses.....

Well yes, the money would have to be in discretionary trust for the capital to be disregarded. The thing about a discretionary trust is that you need trustees capable of exercising discretion and they generally don't do it for free.

rogerblack wrote: »

...
Inheritance tax planning is an area most lawyers are familiar with.
Benefit 'tax' planning of inheritors is not.

No, I expect lawyers are quite capable of understanding the DWP manual on the Assessment of Capital. More to the point however, they're more than capable of understanding their own fee structures, and working out that £16k's worth of capital ain't going to go very far.

(Plus I expect they know that discretionary trusts are subject to a 50% income tax rate.)

damino

antrobus wrote: »

<snip>
(Plus I expect they know that discretionary trusts are subject to a 50% income tax rate.)

though income from a trust would I suppose mean income on interest earned from a trust?

So for a person with £16K in a trust, if interest is 1% then £160 a year gets added, and £8o goes to the Inland Revenue. I suppose. So 50% income tax on the trust doesn't cause a big loss

The big question, is what kind of fee would it cost to get a lawyer to work to help configure a trust?

I guess it's not covered by Community Legal Advice?

By the way, regarding lawyers being capable or not capable of reading DWP stuff to find out those rules. I suppose they are, but often you want one that has done it before. One may get a trainee solicitor , also capable, but if they're experienced then that's better and I would guess many lawyers are not experienced in that and might even charge more to look into it.

Pineapple88

damino wrote: »

i'm no expert but from what i've been told, and could be wrong, but apparently you qualify once your savings are that.

Qualify automatically even with no NI contributions? As far as I'm aware, to receive contribution based ESA if wholly dependent on having sufficient NI contrutions (and subsequently passings an ATOS work capability assessment) so if they did not have the qualifying amount of NI contributions they would not be paid anything and would instead be assessed for income based ESA. If they qualified for income based ESA but had savings over £16000 they would not be paid anything (but may still receive NI contributions credits for the puspose of state pension). [/QUOTE]

damino wrote: »

be interesting if you or somebody can show how that can be.

There is a benefits calculator at www.turn2us.org.uk

You can play around with it and put in different scenarios to see what someone in the situations you describe would be entitled to.

Two4Tuesday

damino wrote: »

Why if somebody has over £16K savings, do they switch to contribution based and pay the full ESA amount.
Whereas with £6-£16K savings they pay less?

Completely and utterly wrong.

A claimant can claim contribution based ESA so long as they meet the contribution conditions for the 2 tax years prior to the benefit year in which they start their claim, and so long as they haven't exhausted any time limit for claiming (currently 1 year for Work Related Activity Group)

It doesn't matter whether they have savings or not.

If the person has no other income or savings, they can also apply for Income Related ESA. Because entitlement to Income Related ESA can include premiums bringing the total payment above what they might get on contribution based alone, a claimant may get elements of both contribution based and income based.

This makes the rest of your questions moot.

I know this from

(a) working as a Benefits New Claims Advisor in the early 1990s when the rules were similar if not identical
(b) being on ESA contribution based and income related top up from 2009 despite having no savings or other income after bankruptcy.

rogerblack

Pineapple88 wrote: »

The person with £15, 900 savings with qualifies for a small amount of ESA, HB and CTB. I haven't worked out the figures but the difference between what they get and what the person with £16,100 gets may only be small.

It's not.
It's quite large.
It's - for each benefit (assuming under 60 and other things), 1 pound for each 250 of savings exceeding 6K.
So, 40 pounds a week.

This could be as much as 120 pounds down - though the vast majority don't pay 2000 council tax a year, so the actual number will be somewhat lower.
But it will start out around 100 pounds lower per week.
Or perhaps 3-4000 in the first year.

damino

rogerblack wrote: »

It's not.
It's quite large.
It's - for each benefit (assuming under 60 and other things), 1 pound for each 250 of savings exceeding 6K.
So, 40 pounds a week.

This could be as much as 120 pounds down - though the vast majority don't pay 2000 council tax a year, so the actual number will be somewhat lower.
But it will start out around 100 pounds lower per week.
Or perhaps 3-4000 in the first year.

Then it hinges on whether a person with £16,100 savings, but not working(and didn't have NI contributions when they got to that level so they were on income related before), if they're entitled to Contributory ESA (I understand they're not entitled to the income related ESA even reduced)

If they're not entitled to ESA at all then they'd be substantially worse off. At £40 a week less than the £15900 savings person. If they are entitled to it and without reduction to ESA, then they'd be substantially better off.