Dilemma

stefano

I have been a victim of a serious road traffic accident 4 years ago, and it left me with some serious orthopedic injuries, and a life with chronic pain. This means that my career in hospitality can no longer be pursued, and it was something I loved, I was good at and was making a serious living out of it in London's 5 star hotels.
So now I have to rely on the benefit system which, btw, is a nightmare.
My question is: I will soon receive a payout from a court case, the money will be in a Personal Injury Trust Fund, and I am thinking of paying off the mortgage, which would save me £663 per month.
Should I also cancel my life insurance? My health has changed dramatically, so it may not be valid anyway, but will paying off my mortgage affect my council tax benefit?

help4help2013

you need to inform the DWP of any monies you get really as thy might class this as though you have deprived yourself of income to claim benefits

i dont think you can get council tax benefit if you have savings or capital over £16.000

paddedjohn

If the cash is in a trust then its disregarded for some/all benefits although any benefits received in relation to your injuries thus far may be claimed back.

fannyadams

can't you CLAIM on your life insurance as you've had a life changing accident?
I'd certainly talk to the insurers to see what they think...

BigAunty

See the terms of your life insurance and check with experts rather than relying on an assumption. life insurance policies can be invalided if the person has given false information at the outset but I am not sure that a change in health after they have validly been taken out necessarily means the policy is worthless. This is a benefits forum so few posters here will have the knowledge to advise you in this area. perhaps there's a more appropriate forum for this issue?

Heycock

There are some life policies that pay out early if an illness or injury is near-future terminal but they are few and far between.
If it was combined with an accidental injury policy it may pay out but these are normally separate policies. Check what you've got.

If it's just a life policy term or endowment and you can afford the premiums, KEEP IT. You won't be able to replace it at a later date without paying through the nose...that's if you can get it with your condition.
You must KEEP IT. It will pay out according to what your condition was at the time you took the policy out. If you answered the questions truthfully at THAT time, then you have no worries.

stefano

Policy was taken out when I was very healthy, and working earning a very good salary. It's a fixed term life policy, that would pay out on death. My payment can go into a personal injury trust legally, and can be disregarded for future benefits, my question was, will paying off my mortgage affect my council tax benefit?

Heycock

Given you a link that explains the law regarding trusts and benefits. Hope it helps. Generally monies in an injury trust fund are disregarded as capital. Therefore you should not be considered to be guilty of deprivation of capital. How you spend the trust money is up to the terms of the trust and nothing to do with DWP or your LA. And if the life policy is term life, then keep it ...you're unlikely to get a better deal later.

http://www.personalinjurytrusts.co.uk/what-is-a-personal-injury-trust.html

stefano

Heycock wrote: »

http://www.personalinjurytrusts.co.uk/what-is-a-personal-injury-trust.html

The link provides information on most benefits except Council Tax Benefit, but thanks, I will assume it won't affect it.
I know that any income from investments of money from a PIT will also be disregarded for means-tested benefits. Unfortunately, the injuries sustained will not allow me to pursue the career I was best at, and retraining in mid-life, does not seem an option in the current labour market.
I am toying with the idea of purchasing a buy-to-let property as an investment with the remainder of the money, or even only part pay my mortgage and use more money to maybe get 2 buy-to-lets.
Is there anyone that can offer an opinion?

BigAunty

stefano wrote: »

my question was, will paying off my mortgage affect my council tax benefit?

Is it going to get paid off by the Trust that is getting set up?

Do you mean whether or not it would fall within deprivation of capital rules (i.e. intentionally paying off a loan that isn't legally due in order to maximise benefit entitlements?). I don't know the position on trusts and deprivation of capital but you can google to see if you can uncover anything in this area.

An owner occupier living in a property that's fully owned is still entitled to means tested benefits because owner-occupation doesn't have the equity in the property classed as capital (so long as they haven't fallen foul of DoC rules which are complex but are about deterring people from deliberately giving away their capital or spending it foolishly in order to qualify for benefits). A person can own their house outright and still get things like income support, council tax benefit, JSA income related and so forth (so long as they didn't pay it down with a win on the Bingo or inheritance then pop up immediately to say they can't pay their council tax as they are too poor....).

The reason why an owner occupied house isn't classed as capital by the DWP, HMRC or local councils is that the equity in it cannot be realised while it operates as their sole home. This is in contrast to things like savings, investments, premium bonds, etc, that can be cashed in during times of need.

I don't know the position on Trusts but for people who aren't in a trust situation, if they have a buy to let property, the capital in the second property will invariably impact their entitlement to things like council tax benefit at the property their occupy. Sums over 6k in capital (i.e the equity) will start to reduce their entitlement to means tested benefits like council tax discount and after 16k, would completely rule them out, even if the actual income they got from the rental properties were low. Would the investment properties you are considering be held by the trust?

Currently tax credits ignore second home ownership but they get scrapped when Universal Credit is bought in and the capital rules that apply to housing benefit/incomesupport/council tax discount will be applied, meaning poor landlords with low incomes but who do have capital in their rental properties will struggle to qualify for UC. Again, this is the general position, I don't know the position for trust owners.

Yours is a complex case. You really need expert, specialist advice rather than relying on advice given on a general benefits forum.

Assuming you pay off your mortgage and are entitled to council tax discount legitimately, can you live on the sum of benefits you may be entitled to, such as PIP, Income support or similar or is this why you are seeking a return on the sum in the trust?

stefano

The investment from the trust will hopefully make up the wages shortfall, due to incapacity to carry out the job I previously did. I don't want to be on benefits for ever, I reallu want to work, if I find an employer willing to employ me.
The trust would pay the mortgage and possibly the second property.