Deprivation of Capital

ConfusedUK35

Hi. My husband, myself and my 4 children all aged 11+) get the following benefits

-Income related ESA
-Child Tax Credits
-Child Benefit
- I get PIP
-One son gets DLA
- 2 lots of caters allowance
- Housing benefit (to housing association) and Council Tax Benefit

My Nanna recently passed away so I will be receiving some inheritance, I have no idea of how much at this stage. I know about the ‘over £6k’ and ‘over £16k’ rule but I have some debts that I would like to pay off. They are a credit card, car finance, two store cards and an overdraft. Would any of these be deprivation of capital? They are not helping my mental health looming over me and I would love to pay them off but don’t want to get into trouble. 

As I said, this is all speculation at the moment as I don’t know how much or when I will get it.

Any advice on whether I would be allowed to pay these debts would be appreciated. Thank you all.

TELLIT01

There are only limited situations in which you can pay off debts when on Income Related ESA without it being classed as deprivation of capital.  On UC there is much more leeway in what can be repaid. 

I don't know if (a) it's possible to request a move to UC and (b) whether or not it would be in your financial interest to do so.  Without knowing how much the inheritance is likely to be, and what the debts are it's difficult for anybody to provide much helpful advice.

calcotti

TELLIT01 said: I don't know if (a) it's possible to request a move to UC 

Somebody who wants to move simply makes a claim for UC. That automatically ends the existing means tested benefits. Whether it is beneficial is another matter.

Regards the question on deprivation of capital
Child Benefit, PIP, DLA and Carer's Allowance are not affected by capital.
Child Tax Credits are also not affected by capital.
The benefits that will be affected by capital are the income based ESA, HB and CTR.

Do you know if the ESA is entirely income based or a mix of contribution based and income based? If any of it is contribution based that is not affected by capital.

For the benefits that are affected by capital it will fall to a Decision Maker to decide whether paying off the debt is reasonable in the circumstances. (The difference with UC is that the rules for UC specifically state that paying off debt is not deprivation of capital.)

You should  make no decisions until you have more information about the sums involved. If you are going to left with more than £16,000 after paying off debt you are definitely better off on your existing benefits because you retain the Tax Credits.

See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/932378/dmgch52.pdf

Onus of proof

52825 DMs have to show the claimant's or partner's purpose was to get benefit or more benefit if they decide claimants or partners have deprived themselves of capital. Getting benefit or more benefit may not be the claimant's or partner's predominant purpose but it must be a significant one. ..

Facts which the DM should consider

Did claimants have a choice when they deprived themselves of capital

52832 The DM has to decide why claimants or partners chose to deprive themselves of capital when they did if they had a choice in the matter. The fact that claimants had a choice does not mean their purpose was to get benefit or more benefit. It is a fact which the DM should take into account when deciding the claimant's or partner's purpose.

52833 Claimants or partners have no choice if they use their capital to pay. for the necessities of life, such as food and fuel or
2. debts which are

2.1 immediately repayable and

2.2 legal debts capable of enforcement or 

3. the Department to repay an overpayment.

Claimants or partners who had no choice have not deprived themselves of capital to get benefit or more benefit.

52834 Claimants or partners have a choice if they. give their capital away

2. spend their capital extravagantly or imprudently even if they say they have used it to pay for the necessities of life

3. pay back a debt before the agreed date, such as when they pay off their mortgage and the agreement says it is not due to be paid back for another 15 years

4. pay more than the amount due on a debt, such as when they pay more than the minimum payment on a credit card debt, unless the payment has been made to remove the threat of high interest payments and the DM decides it was reasonable for the claimant to act in the way that they did.

5. pay back a debt which is not a legal debt capable of enforcement

Did people say what they were going to do with their capital

52843 Claimants or partners have not deprived themselves of capital for the purpose of getting benefit or more benefit if they

1. say exactly what they are going to do with their capital and

2. are told by the DWP it will not affect the amount of benefit they can get and

3. do what they said they were going to do with their capital.

ConfusedUK35

calcotti said:

TELLIT01 said: I don't know if (a) it's possible to request a move to UC 

Somebody who wants to move simply makes a claim for UC. That automatically ends the existing means tested benefits. Whether it is beneficial is another matter.

Regards the question on deprivation of capital
Child Benefit, PIP, DLA and Carer's Allowance are not affected by capital.
Child Tax Credits are also not affected by capital.
The benefits that will be affected by capital are the income based ESA, HB and CTR.

Do you know if the ESA is entirely income based or a mix of contribution based and income based? If any of it is contribution based that is not affected by capital.

For the benefits that are affected by capital it will fall to a Decision Maker to decide whether paying off the debt is reasonable in the circumstances. (The difference with UC is that the rules for UC specifically state that paying off debt is not deprivation of capital.)

You should  make no decisions until you have more information about the sums involved. If you are going to left with more than £16,000 after paying off debt you are definitely better off on your existing benefits because you retain the Tax Credits.

Thank you for such a detailed response. The ESA is just income based and I am in the support group

I don’t really want to move to UC until I am made to as I’ve heard lots of scary stories and my anxiety is bad enough lol

poppy12345

ConfusedUK35 said:

calcotti said:

TELLIT01 said: I don't know if (a) it's possible to request a move to UC 

Somebody who wants to move simply makes a claim for UC. That automatically ends the existing means tested benefits. Whether it is beneficial is another matter.

Regards the question on deprivation of capital
Child Benefit, PIP, DLA and Carer's Allowance are not affected by capital.
Child Tax Credits are also not affected by capital.
The benefits that will be affected by capital are the income based ESA, HB and CTR.

Do you know if the ESA is entirely income based or a mix of contribution based and income based? If any of it is contribution based that is not affected by capital.

For the benefits that are affected by capital it will fall to a Decision Maker to decide whether paying off the debt is reasonable in the circumstances. (The difference with UC is that the rules for UC specifically state that paying off debt is not deprivation of capital.)

You should  make no decisions until you have more information about the sums involved. If you are going to left with more than £16,000 after paying off debt you are definitely better off on your existing benefits because you retain the Tax Credits.

I don’t really want to move to UC until I am made to as I’ve heard lots of scary stories and my anxiety is bad enough lol

It's not all bad. There are people that have moved accross without any problems at all. As your ESA is all Income Related, if your savings go over £16,000 then your means tested benefits will stop. Once they drop below £16,000 you will have no option but to claim UC if you want to continue to receive help with the rent.

Robbie64

For legacy benefits such as income related ESA the Decision Maker will usually take into account whether the payment (of a debt) was a necessity rather than by choice. I've taken this to mean that if the account is in arrears and legal action (a default, a CCJ) is looming then paying the debt would be a necessity. However, if it is just to clear the balance on an account where e.g. payments are up to date it could be treated as deprivation.

It may be different if your day to day bank account is overdrawn. Paying the inheritance into the account would reduce your capital but I can't see how this could be classed as deprivation.

Edit to add: the above relates to how repayment of the overdraft may not be treated as deprivation even if paying off credit card balances etc is.

calcotti

poppy12345 said: As your ESA is all Income Related, if your savings go over £16,000 then your means tested benefits will stop. 

For the avoidance of doubt, except for the Child Tax Credits.

calcotti

Robbie64 said:

.. it could be treated as deprivation.

That is the key point, doesn’t mean that it will. 

ConfusedUK35

ConfusedUK35 said:

calcotti said:

TELLIT01 said: I don't know if (a) it's possible to request a move to UC 

Somebody who wants to move simply makes a claim for UC. That automatically ends the existing means tested benefits. Whether it is beneficial is another matter.

Regards the question on deprivation of capital
Child Benefit, PIP, DLA and Carer's Allowance are not affected by capital.
Child Tax Credits are also not affected by capital.
The benefits that will be affected by capital are the income based ESA, HB and CTR.

Do you know if the ESA is entirely income based or a mix of contribution based and income based? If any of it is contribution based that is not affected by capital.

For the benefits that are affected by capital it will fall to a Decision Maker to decide whether paying off the debt is reasonable in the circumstances. (The difference with UC is that the rules for UC specifically state that paying off debt is not deprivation of capital.)

You should  make no decisions until you have more information about the sums involved. If you are going to left with more than £16,000 after paying off debt you are definitely better off on your existing benefits because you retain the Tax Credits.

Thank you for such a detailed response. The ESA is just income based and I am in the support group

I don’t really want to move to UC until I am made to as I’ve heard lots of scary stories and my anxiety is bad enough lol

I have just received a copy of the will and it says that my mum and uncle are trustees and me and my children beneficiaries. There is still no mention of amounts so I’m still a bit confused. Does a trust change things?

calcotti

Rules around trusts are complicated. If you only receive money at the discretion of the trustees then it may have no impact on your benefits except when you actually receive money.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/932378/dmgch52.pdf#page18
paragraph 52236 and following

TELLIT01

ConfusedUK35 said:

ConfusedUK35 said:

calcotti said:

TELLIT01 said: I don't know if (a) it's possible to request a move to UC 

Somebody who wants to move simply makes a claim for UC. That automatically ends the existing means tested benefits. Whether it is beneficial is another matter.

Regards the question on deprivation of capital
Child Benefit, PIP, DLA and Carer's Allowance are not affected by capital.
Child Tax Credits are also not affected by capital.
The benefits that will be affected by capital are the income based ESA, HB and CTR.

Do you know if the ESA is entirely income based or a mix of contribution based and income based? If any of it is contribution based that is not affected by capital.

For the benefits that are affected by capital it will fall to a Decision Maker to decide whether paying off the debt is reasonable in the circumstances. (The difference with UC is that the rules for UC specifically state that paying off debt is not deprivation of capital.)

You should  make no decisions until you have more information about the sums involved. If you are going to left with more than £16,000 after paying off debt you are definitely better off on your existing benefits because you retain the Tax Credits.

Thank you for such a detailed response. The ESA is just income based and I am in the support group

I don’t really want to move to UC until I am made to as I’ve heard lots of scary stories and my anxiety is bad enough lol

I have just received a copy of the will and it says that my mum and uncle are trustees and me and my children beneficiaries. There is still no mention of amounts so I’m still a bit confused. Does a trust change things?

If there is no actual figure, there will be something in the will stating the proportion of the estate to go to each person, or information about which items they will receive.