Benefits ‘Grace Period’ to buy a home after sale?

JBTISH

Good morning

I recently spoke to an experienced Welfare Rights person concerning the sale of a share in a property owned by someone on Pension Credit. The Welfare Rights person advised that there is a 6 month ‘Grace Period’ from receipt of monies from a sale of a home to the purchase of a new home before Pension Credit stops (or requires the DWP to be notified). I didn’t wish to be rude to someone who’s been doing their job for 25 years so didn’t query this point but I am of the opinion that this grace period only applies if you are selling your ‘primary residence’ and purchasing another ‘primary residence’. ie you are given six months to sell one home and buy another and there is six months overlap where you don’t need to notify the DWP as this is allowed for ‘being reasonable”. This would seem reasonable but I don’t think it would apply if selling a second home (that you own a share in but don’t live in) and wish to put the funds towards a primary residence as you currently have a home to live in and therefore would not be in a transition period with the subsequent upheaval and deadlines. *In either case I would think the DWP would need to be notified asap given the change in circumstances.

1. Can anyone clary this point concerning the grace period and buying a primary residence or second home? A link to the DWP rules on this would be great if you have one.  Could you also clarify if you are required to notify the DWP in these specific circumstances at all or straight away. 

2. Can anyone think of a way to purchase a property efficiently and legally without the potential stopping and starting of Pension Credit and the ensuing delays and backlogs to reinstate it? Is it possible to set the money aside or in trust for a set time period ‘legally’ with the caveat it can only be spent on the purchase of a property while continuing to receive Pension Credit? 

Thanks in advance.

Grumpy_chap

There is a period allowed to disallow capital from selling primary residence to move to the next primary residence.

I assume that is what the expert was referring to.

In most cases, having equity in a second property would mean that entitlement to benefits ceases.

Perhaps you can explain more fully about this second property and how it was declared previously?  Is it a recent inheritance?

TELLIT01

You still need to inform DWP of the date of sale so they know when the disregard will end.

If in receipt of Income Related benefits, the general advice is to inform DWP of any major change in financial circumstances and let them make the decision on how it's treated. 

sheramber

 Has the value of the share in the second property been included in the Pension Credit calculation?

calcotti

JBTISH said:

.. I don’t think it would apply if selling a second home (that you own a share in but don’t live in) and wish to put the funds towards a primary residence as you currently have a home to live in and therefore would not be in a transition period with the subsequent upheaval and deadlines. 

You are correct. The share in the second property should have been declared when benefit was originally claimed. DWP will then take the value of that share into account. The value might be nil if the person with that share is unable to force a sale on their own or the property might be disregarded if certain specified persons are living in the property).

When the property is sold the property proceeds will be taken into account (the amount may differ from the value attributed to the share prior to sale). There is no applicable disregard.

JBTISH said:

Can anyone think of a way to purchase a property efficiently and legally without the potential stopping and starting of Pension Credit and the ensuing delays and backlogs to reinstate it? Is it possible to set the money aside or in trust for a set time period ‘legally’ with the caveat it can only be spent on the purchase of a property while continuing to receive Pension Credit? 

Not to my knowledge.

The guidance on treatment of capital for Pension Credit can be found here
DMG Chapter 84: Deemed weekly income from capital (publishing.service.gov.uk)

JBTISH

calcotti said:

JBTISH said:

.. I don’t think it would apply if selling a second home (that you own a share in but don’t live in) and wish to put the funds towards a primary residence as you currently have a home to live in and therefore would not be in a transition period with the subsequent upheaval and deadlines. 

You are correct. The share in the second property should have been declared when benefit was originally claimed. DWP will then take the value of that share into account. The value might be nil if the person with that share is unable to force a sale on their own or the property might be disregarded if certain specified persons are living in the property).

When the property is sold the property proceeds will be taken into account (the amount may differ from the value attributed to the share prior to sale). There is no applicable disregard.

JBTISH said:

Can anyone think of a way to purchase a property efficiently and legally without the potential stopping and starting of Pension Credit and the ensuing delays and backlogs to reinstate it? Is it possible to set the money aside or in trust for a set time period ‘legally’ with the caveat it can only be spent on the purchase of a property while continuing to receive Pension Credit? 

Not to my knowledge.

The guidance on treatment of capital for Pension Credit can be found here
DMG Chapter 84: Deemed weekly income from capital (publishing.service.gov.uk)

Good morning Calcotti

Thank you for the useful link. Therefore when you say “there is no applicable disregard”, in this specific case of a share in a 2nd home, the instant the 3rd share owner sells their share of the property and the money is received into their bank account they should:

1) inform DWP straight away and (2) are not entitled to their Pension Credit (above certain specified limits ‘tapered’),  Housing Benefit and Council Tax benefit ‘until’ such time as the funds in their bank account reduces to and or below said specified DWP limits. (3) There is no ‘grace period’ on a 2nd home and (4) An application for the reassessment of Pension Credit can be made at ‘any time’. 

Is that roughly correct?

JBTISH

sheramber said:

 Has the value of the share in the second property been included in the Pension Credit calculation?

Good morning sheramber

Yes the “share in the second property has been included in the Pension Credit calculation” on initial application 17 years ago.

JBTISH

Grumpy_chap said:

There is a period allowed to disallow capital from selling primary residence to move to the next primary residence.

I assume that is what the expert was referring to.

In most cases, having equity in a second property would mean that entitlement to benefits ceases.

Perhaps you can explain more fully about this second property and how it was declared previously?  Is it a recent inheritance?

Good morning Grump_chap.

The Property (abroad) and the one third share was declared 17 years ago to DWP by the person I am caring for. She has never lived in the property and has been unable to sell it as her sister is living in the property. As her sister is now elderly and needs to move home due to health and age it has come to consideration that the property abroad should be sold at some time in the near future. This would mean that the person I care for will have no choice but to accept their share of the funds. In preparation for this event I want to ensure that the funds are used wisely taking into account current and future needs.

Obviously one option would be to (1) simply live off those funds until they run out and then reapply for benefits that they declared they are not entitle to by receiving the money that is above specified DWP limits. In this case that limit would be funds above £15k. 

2. Another option would be to invest the money in a property and live in it as a primary residence thereby removing the person from needing Housing Benefit and still have a home. 

3. A third option would be to buy a 2nd home, loose PC, HB and CTB and add the income from the 2nd rented out property to replace that income lost through declaration of the funds. ie income from a 2nd rented out home would replace the lost income from Pension Credit and also pay the individuals rent in her primary residence. 

All have pros and cons.

It should also be considered that once the funds are received (practically instantly) the person would not be entitled to their Pension Credit and therefore also their Housing Benefit and Council Tax benefit. *I know this to be fact even though I am aware that this would not apply to every individual on Pension Credit and each case is different and decided on its own merits.

Therefore option 1 is simple and they would live off the funds. But if they choose option 2, then until such time as they purchase a property, the funds will be reducing by £250 a week to pay their rent and make the loss of their Pension Credit. One should also consider that even when reaching a point of being ‘legally and financially’ entitled to making an application for their Pension Credit, it could take 6 months and for that time period they would still need to compensate for the loss of the combined sum (benefits lost) of £250 each week. This could leave them in limbo, owning a home, not requiring HB but also short of the amount their Pension Credit that they gave up.

My objective to is find the most efficient, rapid and non wasteful path if option 2 o3 is chosen. 

calcotti

JBTISH said:... by receiving the money that is above specified DWP limits. In this case that limit would be funds above £15k. 

There is no capital limit for Pension Credit. Or do you mean that the Pension Credit amount is only £10/week so would be reduced to nil if there is capital of £15,000. 

JBTISH said: Therefore when you say “there is no applicable disregard”, in this specific case of a share in a 2nd home, the instant the 3rd share owner sells their share of the property and the money is received into their bank account they should:

1) inform DWP straight away 

They must do that even if there were a disregard. It is for DWP to decide when a disregard applies, not for the claimant to decide.

JBTISH said: Therefore when you say “there is no applicable disregard”, in this specific case of a share in a 2nd home, the instant the 3rd share owner sells their share of the property and the money is received into their bank account...There is no ‘grace period’ on a 2nd home and (4) An application for the reassessment of Pension Credit can be made at ‘any time’. 

Yes.

Grumpy_chap

It is good that the 1/3 share was declared at the outset (17 years ago).

With another of the part owners residing in the property, the 1/3 share was possibly disregarded as capital as 1/3 of a property has limited value unless the residing part owner purchased which they may not have been in a position to do.

Was there any income (rent) from the residing owner to have the use of the 1/3 share?

Has the property increased in value in 17 years of partial ownership?  Does this give rise to a CGT liability, either here or in the country where the property is?

JBTISH

Grumpy_chap said:

It is good that the 1/3 share was declared at the outset (17 years ago).

With another of the part owners residing in the property, the 1/3 share was possibly disregarded as capital as 1/3 of a property has limited value unless the residing part owner purchased which they may not have been in a position to do.

Was there any income (rent) from the residing owner to have the use of the 1/3 share?

Has the property increased in value in 17 years of partial ownership?  Does this give rise to a CGT liability, either here or in the country where the property is?

Good evening Grumpy_Chap

No, there has been no rental income since receiving a 1/3 share 17 years ago. The property has increased in value and will be subject to both French and UK Capital Gains tax but a portion of the French CGT can be offset against the UK Capital Gains Tax. The French Social Levy hidden within their CGT can not be offset. 

Hopefully the person making the assessment will have access to the declaration of the property and one third share declared 17 years ago so that no further issues arise other than the actual assessment of the Pension Credit benefit.