How can we Protect my Sister's Inheritance

Yorkshireman99

securityguy wrote: »

"The renunciation itself is the deprivation of assets according to the DWP rules."

They would struggle to sustain that argument if, for example, a DOV were used to renounce being left shares worth £X and replaced it with cash to a similar value. The mere renouncement can't be deprivation of assets if they are replaced with an asset of a similar value.

It is not a question of the DWP having to sustain the argument as the regulations specifically state it IS deprivation of assets. Also note that a claimant is legally required to notify the DWP of the fact that the are a beneficiary of a will once it has been admitted to probate if it would affect their benefit entitlement. As I said it is the actual renuciation of the legacy that is the crucial thing any subsequent juggling by the executors does cannot alter it in any way.

securityguy

"I can only suggest you look at the DWP rules on deprivation of assets.As I said it is the actual renuciation of the legacy that is the crucial thing."

Which are nothing like as clear cut as you imply. There's only one reference to deeds of variation, which is paragraph 29175, which states (my emphasis) "If the residuary beneficiary gives away his interest by a deed of variation before administration is complete then this may amount to deprivation and the DM should consider DMG 29815 et seq." So that only (for reasons I can only guess at) applies to residuary beneficiaries (helpfully defined in the same paragraph as "a beneficiary without a specific bequest") and only applies if they "give away" their interest (which doesn't include, or would be hard to claim included, trading for things of equal value), and then only "may" be deprivation, with a further set of tests, which are complex.

It's also worth noting paragraph 29856 which establishes that, for example, discretionary trusts are not considered as capital that the claimant could obtain.

I, and I suspect you, don't know what a DM might hold in this sort of case. But I don't think it's remotely as clear as you make out. Deeds of Variation are only considered explicitly in the case of residuary beneficiaries (which is the case in the OP's scenario, but may not be in many cases). Then there is wide latitude in assessing the purpose and effect of the actions. It certainly isn't as simple as "anything involving a deed of variation is deprivation of assets".

There's a primary purpose test, too.

Relevant chapter of the DM guide is here: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/470848/dmgch29.pdf

Yorkshireman99

Noted. We clearly will never agree. Nevertheless the OP needs to get paid for professional advice if the DOV route is chosen.

Malthusian

In this very interesting debate I am inclined to agree with securityguy (not that anyone died and made me moderator). If renouncing an inheritance via DOV was ipso facto deprivation of assets even if the effect of the DOV was to replace it with a legacy of equivalent value, then that would imply that if someone was due to receive a legacy of £5,000 in shares and a DOV was executed such that they received £5,000 in cash instead, they would be assessed as if they had received £10,000 in assets (£5,000 renunciation + £5,000 actually in their bank account). I can fully believe that the DWP is capable of some absurd judgements but that's a stretch.

The most tenable argument for the DWP would be that an annuity purchased for £X is not as valuable as £X in your hand (which is true; even if annuity rates weren't abysmal, when you convert capital into an annuity the insurer must take a cut) and the difference could be deprivation of assets. But I am speculating and professional advice from someone who actually knows is essential.

JimmyTheWig

Malthusian wrote: »

In this very interesting debate I am inclined to agree with securityguy (not that anyone died and made me moderator). If renouncing an inheritance via DOV was ipso facto deprivation of assets even if the effect of the DOV was to replace it with a legacy of equivalent value, then that would imply that if someone was due to receive a legacy of £5,000 in shares and a DOV was executed such that they received £5,000 in cash instead, they would be assessed as if they had received £10,000 in assets (£5,000 renunciation + £5,000 actually in their bank account). I can fully believe that the DWP is capable of some absurd judgements but that's a stretch.

I agree. Clearly the two are equal.

The most tenable argument for the DWP would be that an annuity purchased for £X is not as valuable as £X in your hand (which is true; even if annuity rates weren't abysmal, when you convert capital into an annuity the insurer must take a cut) and the difference could be deprivation of assets. But I am speculating and professional advice from someone who actually knows is essential.

I think there's a bigger issue than the insurer's cut.
Lets say the will left them £60k. DWP argues that could last them 3 years, at £20k a year.
Instead they get an annuity for £3k a year.
Would the DWP not argue that they've deprived themselves of £17k a year for those three years?

My concern for the OP's sister would be that they get the lump sum and the controlling husband spends it all within 6 months. DWP count this as deprivation of assets and the OP's sister is left destitute. What I would want to do, then, is find out how many months the DWP believes the lump sum should last and establish a mechanism where the money is paid out evenly divided across that many months. She'll lose the benefits for that period, but that sounds like a given anyway. But at least this way the benefits would be replaced rather than at risk.

willieormandsheroes

Thankyou everyone for the debate - I am following with interest.

If it makes any difference to the thinking my sister is likely to get of the order of £100k. And I should note that neither my brother or I are actually seeking to avoid getting my sister or her husbands means-tested benefits stopped - just wanting the best for her (and removing a possible future dependency on us to be honest).

I am sure that a trust paying say even just £1000 a month would more than meet their needs even with means-tested benefits stopped. Though whether or not her husband keeps that income from her, as he currently does with her benefits, who will know. At the moment she gets drip fed her own benefits from his bank account - she does not get to manage them in any way.

Yorkshireman99

willieormandsheroes wrote: »

Thankyou everyone for the debate - I am following with interest.

If it makes any difference to the thinking my sister is likely to get of the order of £100k. And I should note that neither my brother or I are actually seeking to avoid getting my sister or her husbands means-tested benefits stopped - just wanting the best for her (and removing a possible future dependency on us to be honest).

I am sure that a trust paying say even just £1000 a month would more than meet their needs even with means-tested benefits stopped. Though whether or not her husband keeps that income from her, as he currently does with her benefits, who will know. At the moment she gets drip fed her own benefits from his bank account - she does not get to manage them in any way.

This might sound obvious but why are her benefits going into his bank account? Ultimately she has got to make the break and it is difficult to see what you can legally do unless she is prepared to do so.

Mojisola

willieormandsheroes wrote: »

I am sure that a trust paying say even just £1000 a month would more than meet their needs even with means-tested benefits stopped. Though whether or not her husband keeps that income from her, as he currently does with her benefits, who will know. At the moment she gets drip fed her own benefits from his bank account - she does not get to manage them in any way.

Would her husband stay around if she signed a DOV and their benefits were stopped as a result? Or would an independent action like that cause him to become more abusive?

Yorkshireman99

Malthusian wrote: »

In this very interesting debate I am inclined to agree with securityguy (not that anyone died and made me moderator). If renouncing an inheritance via DOV was ipso facto deprivation of assets even if the effect of the DOV was to replace it with a legacy of equivalent value, then that would imply that if someone was due to receive a legacy of £5,000 in shares and a DOV was executed such that they received £5,000 in cash instead, they would be assessed as if they had received £10,000 in assets (£5,000 renunciation + £5,000 actually in their bank account). I can fully believe that the DWP is capable of some absurd judgements but that's a stretch.

The most tenable argument for the DWP would be that an annuity purchased for £X is not as valuable as £X in your hand (which is true; even if annuity rates weren't abysmal, when you convert capital into an annuity the insurer must take a cut) and the difference could be deprivation of assets. But I am speculating and professional advice from someone who actually knows is essential.

The difficulty is people cannot grasp the fundamental way a simple DOV works. In this particular case the person simply renounces the inheritance. They cannot specify what is to be done with money since that would not be renouncing it. In the case under discussion the amount would simply fall back into the estate to be distributed according to the will. This might be as a residue or possibly, for example, where an asset was originally divided three ways it would now divided by two. The executors have no power whatsoever to purchase anything for the renouncing beneficiary. The are legally obliged to follow the terms of the will as amended by the renunciation.

So however ingenious they maybe the schemes to circumvent the rules they will not work. I must admit that when I first hear about the way the DWP and local authorities regarded renounced legacies I was most sceptical. I made various enquiries including to my own solicitor to see what effect it might have on my own family's affairs. These confirmed renouncing a legacy is regarded as asset deprivation. From the official position it easy to see why they see it as asset deprivation. I am surprised that none of the so called "public interest layers" have not challenged the concept. This suggests to me that they regard it as case they would not win. If anyone can cite a High Court ruling on this would be pleased to hear it.

securityguy

"The difficulty is people cannot grasp the fundamental way a simple DOV works. In this particular case the person simply renounces the inheritance."

That simply isn't true, either in specific or general. A deed of variation is an instrument which describes changes to the distribution of an estate. It may change amounts, forms, timescales, anything which is contained in the will. It might alter one bequest, it might effectively tear up the entire will and start again. It requires the agreement of everyone whose position is materially negatively affected, and the wise executor would draw "materially" widely. At the point at which the change is made, the agreement is to the eventual outcome: you don't renounce a legacy and hope that the right thing happens later. A document which describes the new distribution is drawn up and agreed to by everyone affected where there's the slightest prospect they might be held to have been disadvantaged. You keep on talking about renouncement of legacies and them falling into the residue: that isn't a deed of variation, it's just renouncement.

"These confirmed renouncing a legacy is regarded as asset deprivation."

That's right. But a deed of variation isn't necessarily renouncement, and I've shown you the sections in in the DWP decision maker's guide which describes this.

Taken to the limit, you seem to be arguing that a deed of variation whose effect was to replace a car worth five grand with five grand in cash would be deprivation of assets. It clearly wouldn't. The precise scenario I outlined was replacement of £X with an annuity with a net present value of £X. I can see arguments in both directions, and in the end a statement from the DWP relating to that precise scenario for the precise claimant is the only thing that matters. But that does not involve, and is not, renouncement.