House benefit savings rules Help

bloolagoon

jonesa7777 wrote: »

To Tomtontom: Please do respond again.
To everybody else: Thank you. I was hoping somebody would help with a legal, ethical way of doing something with the 23,000 she has. I know she perhaps could buy 25% of a shared property. It is an option she considers as well but she was advised against it as apparently it is very difficult to sell in the future and you also lose out on the value of the share with the passage of time. Any other ideas? Thanks in advance.

As above keep the caravan.

bloolagoon

jonesa7777 wrote: »

To: Bloolagoon, I just noticed your suggestion about the caravan. Can you elaborate on that? Thanks

She can sell the caravan to you at a low price. She can't sell it for a high price then give the money to you.

marliepanda

bloolagoon wrote: »

She can sell the caravan to you at a low price. She can't sell it for a high price then give the money to you.

That would still be considered deprivation, especially as she had only recently bought it. You really think buying a 20k caravan then selling it for 3k is going to fly...

Mojisola

jonesa7777 wrote: »

I realise she can give tax free £3000 a year to her children, so for two years she can give away £12,000 in total.

She can give away £3000 in total each year (not £3000 to each person!).

However as this is to avoid paying inheritance tax and that doesn't sound as if it will an issue, it doesn't apply here.

bloolagoon

Unless the caravan is a 52 week static then I *think* it's then classed as owning a 2nd home. If its not then what she sells that van to you for is of no relevance to benefits (only the money that comes into her account).

bloolagoon

marliepanda wrote: »

That would still be considered deprivation, especially as she had only recently bought it. You really think buying a 20k caravan then selling it for 3k is going to fly...

No it wouldn't - no form asks about assets that are vehicles, vans etc


The house sale money may be though... They may ask where the house sale money went of course


Hence why I'd keep it to see how it turns out.

marliepanda

bloolagoon wrote: »

Unless the caravan is a 52 week static then I *think* it's then classed as owning a 2nd home. If its not then what she sells that van to you for is of no relevance to benefits (only the money that comes into her account).

But they WILL ask where the £20k went from her flat sale, especially as it was 'recent'

bloolagoon

marliepanda wrote: »

But they WILL ask where the £20k went from her flat sale, especially as it was 'recent'

Yes - why I'd wait and hold onto the van.

The issue isn't the caravan - it's the house sale.

jonesa7777

Just to add: keeping a caravan is costly is it has a ground rent. Thanks anyway.

Mr_Lawnmower

marliepanda wrote: »

But they WILL ask where the £20k went from her flat sale, especially as it was 'recent'

Indeed.


As I said in my earlier reply, the OP's mother is free to do as she wishes with her capital. There seems little point worrying about the rules relating to inheritance tax and capital gains tax from the mother's perspective. Unless we're missing any information, her estate is far too small to reach the inheritance tax threshold. The £3k gain on the caravan is below the capital gains tax threshold - an individual is allowed £10,900 gains free of capital gains tax in the 2013-14 tax year.

If there are other assets, such as a property she is not living in as her main residence, they will be taken into account for tax and benefit purposes.


Let's reframe the situation. Someone below state pension age has around £23k in assets that count as capital for benefits purposes, and is facing a situation where their income may well not cover essential bills.

£23k puts this person over the £16k upper capital limit for means tested help.


The first step is to check that no non-means tested help would apply. This seems unlikely in the circumstances, as the person is still working but may have to reduce their hours. If the person stops working on health grounds, they may be entitled to Contributions Based ESA.

The next step is to consider tax credits, which do not have a 'hard' capital limit. It is possible that Working Tax Credit may apply here on the grounds of disability.

If neither of these are possible, but expenditure exceeds income, the capital will diminish over time via everyday expenditure until means tested help becomes available.


Anyone is free to spend their money as they see fit, so long as they do not receive or intend to claim means tested help. There is nothing stopping this person making gifts in lieu of inheritance at the moment.

What a(n intending) claimant cannot do is use their savings and other assets in ways that amount to intentionally disposing of capital, then expect to be assessed as if they no longer have the disposed of capital. This can be a difficult topic, but gifts in lieu of inheritance are clearly intentional disposal of that capital. The intention is to prevent having to spend that capital in ways that would otherwise be met by the state.

Anyone claiming or already receiving means tested help should expect to have to account for any disposals of capital, including the provision of relevant documentation. Something that looks dodgy might be justified by evidence. One example I'm aware of is where a disabled person transferred a large sum to a relative's bank account. The transfer was explained as being an exact refund for the cost of car repairs that the relative had arranged and initially paid for on the disabled person's behalf whilst the disabled person was very unwell. The VAT invoice from the garage confirmed the work was carried out on a car registered to the disabled person and was strong evidence that the transaction was nothing more than the disabled person repaying a debt that was due. Should it have been necessary, the relative was happy to provide a credit card statement proving they had initially paid the garage bill on the disabled person's behalf and a bank statement proving they had received the sum transferred by the disabled person.


Anyone withholding information about certain assets because they understand them not to be treated as capital takes the risk that, if they are wrong in their understanding, the situation will be viewed as intentional and dishonest withholding of relevant information, which leaves the way open to conviction for fraud related offences. This risk may be even higher with transactions that may be difficult to detect and where there is potentially some debate over the cash value, such as gifting of physical possessions.


There is an argument to adopt the same approach as insurance - if the claimant declares everything, they should be able to rely on the decision to disregard irrelevant matters. If the decision maker misapplies the law and the claimant can prove he or she made a full, frank and timely declaration, the claimant should have everything necessary to defeat a later accusation of overpayment of benefit or fraud. There seems little alternative to any overpayment being written off as the consequence of official error in the event of a proven full declaration.

If a claimant withholds information he or she wrongly believes is not relevant, that claimant will be subject to the full consequences of their failure to declare. No limitation period applies here - both claims for repayment and prosecution are possible any time overpayment comes to light.