Equity and loss of benefits.

jaxa

Moderators...please move this post if it's on the wrong place.

Due to divorce the family home has been sold…I am 66yrs old, retired due to poor health, and have shared care of my 2 sons 14 and nearly 16,. I get CTC for one child, full council tax rebate and free school meals due to my low income. I have no savings at the moment.
I am going to have to join the private rental market but it looks like I will lose all my benefits because of my equity payout.
I wanted to protect this money to help fund my children’s further education but I don’t want to break the rules.
Are there any investments I could make to ring fence the bulk of the equity while keeping access to it?
Has anyone got any advice about the best way I could do this.

le_loup

You would like to have lots of money and for me to pay your benefits?
Have I got this right?

bugbyte_2

le_loup wrote: »

You would like to have lots of money and for me to pay your benefits?
Have I got this right?

Not sure about this argument - Consider two people. One pays in many times more then they get of the system by working their guts off and goes without because they save for their retirement, whilst the second makes no attempt to educate themselves or get a job, ever. They both end up with the same state pension. In fact, some would argue the first does not deserve anything because he saved for his future. Fair?

The OP did say they wanted to keep within the law so its a bit difficult to make a moral judgement.

SailorSam

Is there no way you could down size and buy a smaller house than the family one that's being sold. Even if it were only one of these where you buy a 50% share and rent the rest.

Archi_Bald

bugbyte wrote: »

One pays in many times more then they get of the system by working their guts off and goes without because they save for their retirement, whilst the second makes no attempt to educate themselves or get a job, ever. They both end up with the same state pension.

Somebody who never had a job won't get any state pension as they wouldn't have the requisite number of NI contribution years.

bowlhead99

jaxa wrote: »

I wanted to protect this money to help fund my children’s further education but I don’t want to break the rules.
Are there any investments I could make to ring fence the bulk of the equity while keeping access to it?
Has anyone got any advice about the best way I could do this.

You can dump £4k into a Junior ISA for each of them which takes it off the radar as it is no longer your money. You can put more into their names next April when the next tax year comes around.

In that way you ring fence some of the money - but can't 'keep access to it'. However, they will be able to get it back in cash at 18 when it is time to pay for further education so if that is actually your goal, it might work for you. It would no longer be in your name from the perspective of creditors. Of course, as it's in your kids' names, if one of them is an idiot he might withdraw it all on his 18th birthday and go and buy the biggest crate of booze he can find, which wouldn't help your cause.

The simple answer is that you can't really keep access to something if you also want to claim that you don't have access to it because it's ringfenced.

For example, you could also throw some amount of it into a pension (up to the amount you earn this year (and the last couple of years before, to the extent you didn't use your full allowance)) with the intention of withdrawing it in a few years time when needed for further education. The recently announced changes to pension flexibility would help here though the small print has not been made clear. Again it takes it off the radar because you no longer have it in cash or 'unwrapped' savings or investments. But you can't go out and spend it next week. Also, it will look like income when you receive it back in future years which would be a consideration from a benefits point of view at that time.

If the amount of money you've got is enough to buy a small property (even if lower than the standard you were used to) without needing a mortgage, that is one way of getting benefit from it - i.e. not needing to rent - while not keeping it as cash.

System

I would have thought that shifting 8k of your own money into the childrens' names would be considered as deprivation of assets

bowlhead99

It probably depends how much we're talking about. If £8k is a big proportion of her assets such that she gives a huge gift away and then immediately needs to get money from a benefit to make ends meet, it could be deprivation. At the other end of the scale, if she has many tens of thousands coming from the property and stops her benefits anyway because of the huge lump sum, then it is probably not a big deal that she gave some away for the purposes of her kids' education, even if somewhere several years down the line she eventually needs to get benefits again. There will be a grey area.

I thought the child tax credit was more income related rather than capital anyway, and the school meals were also linked to child tax credit, but I may be completely wrong on that.

One thing to consider is that having some capital for a period of time after selling a house is one of the things that can be disregarded from the capital tests if you're intending on using it to buy somewhere else - for 6 months or maybe more https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/246180/Chapter_H2_-_Capital_disregards.pdf
At least, that's the staff guide that considers effects for Universal Credit etc, but there are obviously lots of different types of benefit out there.

IronWolf

Can you not buy a new property with the equity rather than renting?

BLB53

Rather than rent, look into a shared equity purchase with a local housing association. The properties are usually adverised on the likes of Rightmove and Zoopla.

There are situations where you can buy say 50% or 70% with the proceeds of the sale from you matrimonial home. For the over 55s you do not have to pay rent on the percentage you do not own. You would then be in a similar situation benefits wise to how you were before and this would not be regarded as a deliberate deprivation of assets.

uknick

Archi_Bald wrote: »

Somebody who never had a job won't get any state pension as they wouldn't have the requisite number of NI contribution years.

Don't you get notional credits when you sign on?