Friend will receive £150k inheritance soon but is on UC &HB

theDon876

From what I can see there are not many options if you want to stay on UC with inheritance.

1) If he put it in a discretionary trust does this count as deprivation of capital?

2) If he put it into a trust could it be used to pay a mortgage and still stay on UC & HB?

3) If he put it in a discretionary trust what are the rules as to how much and when and what for the trustee can give him money?

4) Could he buy a flat outright with it and stay on UC & HB?


5) Are there any other options to stay on UC & HB and keep the inheritance?

amanda1024

I don’t know anything about trusts, but I think he could use the money to buy a flat and still get UC. Not HB though, since it wouldn’t be needed (although sometimes can get help with service charges etc)

MikeJXE

Why would you want to and why should you be able to keep any of them when you have £150k ? 

5) imo morally NO 

theDon876

MikeJXE said:

Why would you want to and why should you be able to keep any of them when you have £150k ? 

5) imo morally NO 

Well that's just how the world works I'm afraid, if it's legal then people are going to use the rules to their benefit.

ElwoodBlues

1) Yes, DoC
2) Still  DoC
3) Doesn't matter, it was DoC at step 1
4) It could still be considered as DoC - case law shows that a claimant converting from capital in one form to another is still legally depriving themselves of the capital in it's original form. Depends on how clued up the DM is, they might let it through.
5) No, UC legislation is designed to prevent this situation.

If he disposes of the 150k in any other way than spending it on 'reasonable' day to day living expenses, then he's opening himself to DoC rules, and if he can't access the actual money at the same time as being judged ineligible for UC due to notional capital, then could come really unstuck.

Spoonie_Turtle

In reality it's 99.9% sure that number 4 would be fine.  And a DoC decision is appealable, so it would need two DMs and a judge to agree that buying one's own home - something many people think to do with a large inheritance - was mainly to secure benefit entitlement.

However owning one's home comes with expense and responsibility for repairs and maintenance.  And if this person is vulnerable and in something like supported accommodation to still be claiming Housing Benefit, it would be wise to consider whether owning and being responsible for their own home would be right for them.

I know nothing about trusts and can't advise at all there.

Muttleythefrog

MikeJXE said:

Why would you want to and why should you be able to keep any of them when you have £150k ? 

5) imo morally NO 

That's an emotional response.... we're here to give benefit advice not moral lessons. One could argue it is immoral someone could sell a property worth several million pounds and a few months later buy another for near same amount and retain U/C throughout... but U/C rules definitely allow that provided they do it in a timely way and their other savings don't affect entitlement. There's plenty healthy wealthy people out there trying to minimise things like taxes they incur through various 'loopholes'...i.e. look to existing systems to reduce costs and increase incomes. Also worth saying in the long run the state could be better off by allowing say option 4....that'd be a complicated calculation and depend heavily on their circumstances like any long term inability to work etc and age... but it may well reduce burden on state in longer term if for example they largely eliminated their housing costs by buying and were to end up back reliant on income related state benefits once inheritance spent. 

As I see it all could be considered Deprivation of Capital but 4 may not be.

The home you own and live in is not considered as capital but there is a possibility that DoC could be considered even if you retain the capital having converted it into a form normally disregarded. It would be a hard sell if trying to argue they did not do this primarily to gain benefits and as the thread is set up that is indeed the motivating factor. However could try to argue it was a reasonable thing to do with long term stability and reduced costs in mind. For housing costs if they did go down this road and it was not considered deprivation they may be able to claim for help with service costs of flat but I think that's a minor consideration in scheme of things.

Unfortunately with UC they're likely to only take decisions after the event and obviously challenging such a decision is not possible in advance so my personal view is any such course of action would carry notable risk - last thing you'd want is to have a new flat but no ability to afford living in it. I think they should look to try to get a return on the money that compensated for U/C / HB loss and try to mitigate the depreciation of their inheritance. Savings interest rates are coming down but that inheritance could return £8k per year. 

Be useful to know what course of action ends up taken and outcome.

Keep_pedalling

4. Is the only real option. Once the executor is in a position to distribute the estate, your friend must report their change in financial status and both benefits will be lost. If they buy a home with the money and leave themselves with less than £16k then they can claim UC again but they will no longer get HB as they will no longer be paying rent. 

theDon876

I should have also said that he's on the advanced UC, he isn't required to work, he gets around £800 for this. He's also on enhanced PIP. I know PIP isn't affected but I'm showing you his situation. Does this change anything regarding deprivation of capital?

Keep_pedalling

theDon876 said:

I should have also said that he's on the advanced UC, he isn't required to work, he gets around £800 for this. He's also on enhanced PIP. I know PIP isn't affected but I'm showing you his situation. Does this change anything regarding deprivation of capital?

The deceased could have used their will to create a disabled person’s trust for your friend instead of leaving them their inheritance absolutely but I don't know if that can be achieved though a deed of variation. this Mencap leaflet has some info on these sorts of trust.

https://www.mencap.org.uk/sites/default/files/2016-06/Mencap%2527s%20Guide%20to%20Leaving%20Money%20in%20Trust.pdf

p00hsticks

Keep_pedalling said:

theDon876 said:

I should have also said that he's on the advanced UC, he isn't required to work, he gets around £800 for this. He's also on enhanced PIP. I know PIP isn't affected but I'm showing you his situation. Does this change anything regarding deprivation of capital?

The deceased could have used their will to create a disabled person’s trust for your friend instead of leaving them their inheritance absolutely but I don't know if that can be achieved though a deed of variation. this Mencap leaflet has some info on these sorts of trust.

https://www.mencap.org.uk/sites/default/files/2016-06/Mencap%2527s%20Guide%20to%20Leaving%20Money%20in%20Trust.pdf

Even if it could have been set up as a trust, now that the death has occurred and the absolute inheritance has taken effect, a Deed of Variation would need to be agreed by the beneficiary and so I don't think would avoid it being seen as a deprivation of assets.