Giftor and the effects on Universal Credit

samanthadevereaux

My daughter is trying to purchase a shared property. She works full time but is on low wages and so has this topped up with Universal Credit. As her parent, I am the giftor of her deposit.  The solicitor she has was recommended by the shared ownership company and mortgage broker, say that the deposit, from me the giftor, has to go straight into her bank account as she is their client/purchaser. As a consequence of this her Universal Credit would be stopped; as it is over £16k. This would also mean she would be a couple of hundred of pound down each month and would mean her mortgage application would fail. The solicitor seems unsympathetic saying this is the only way to do it and the way they operate. I don't see why the money can't go straight from my account to the mortgage company to avoid this hardship. Please advise?

born_again

So long as the payment is paid in & out within the same UC period. It should not affect her UC.

kingstreet

You don't pay a deposit to a lender. It goes from the purchaser's solicitor to the vendor's (HA) solicitor. I don't know why the gift can't be paid straight to the solicitor. It might be time to get a new one!

Slightly off-topic but may be relevant to other readers.

For what is the UC being paid? If, for example, any of it relates to housing, this will not be included in mortgage affordability and she will have to start a new claim for help towards the SO rent once she has moved.

samanthadevereaux

Thanks, that's interesting, but I've heard that now if there is any big lump of money coming in or out of a benefit claimiants account, banks automatically flag it up and inform DWP. This would mean that her UC would stop and she would later have to reapply again once the money shifted out of her account. Plus, we don't know how long the money would be in her account as the solicitor can't say how long the whole purchase process would rake. Such a worry...

poppy12345

samanthadevereaux said:

Thanks, that's interesting, but I've heard that now if there is any big lump of money coming in or out of a benefit claimiants account, banks automatically flag it up and inform DWP. This would mean that her UC would stop and she would later have to reapply again once the money shifted out of her account. Plus, we don't know how long the money would be in her account as the solicitor can't say how long the whole purchase process would rake. Such a worry...

UC entitlement is based on your circumstances on the last day of each assessment period. As has been advised as long as the money goes into and out of her account during the same assessment period there will be no issues. 

TELLIT01

Prevention of money laundering is one of the reasons lenders/solicitors require the money to come directly from the borrowers account.

Muttleythefrog

What the solicitor says doesn't surprise me as to procedure... although some might allow you to pay directly to solicitor (certainly not the lender). Significantly this can come down to (anti-) money laundering and risk... and solicitors can take short cuts or use poor practice. In my buying of a property a couple of years ago I did similarly... although in our case we had temporarily exempted capital (from sale of property) and took a top up gift from parents in order to meet purchase price... no lender involved. When solicitor asked for funds mother transferred monies to me and an hour or so later I was in my bank instructing them (as the monies were above payment levels for online banking) to move the requested monies to solicitor.

It is entirely possible for you to send the funds to daughter and for her to transfer them to solicitor on same day and it should not affect U/C for reasons given above regarding assessment period. Solicitor should ask for the monies at least days in advance to ensure they can proceed with the transaction. The monies for purchase and other things will be held on client account by solicitor ready for them to move at appropriate time and most notably on day of completion. So I would just follow their instruction and certainly advise against further engagement of debate with them on the issue as it might just raise concerns.

Spoonie_Turtle

samanthadevereaux said:

Thanks, that's interesting, but I've heard that now if there is any big lump of money coming in or out of a benefit claimiants account, banks automatically flag it up and inform DWP. This would mean that her UC would stop and she would later have to reapply again once the money shifted out of her account. Plus, we don't know how long the money would be in her account as the solicitor can't say how long the whole purchase process would rake. Such a worry...

She will need to tell UC what's happened once the money has gone into and then left her bank account for this reason, providing it's within the same assessment period.  Regardless of bank processes and whether it's automatically flagged up, they would find out eventually and question it, so telling them about it means they know she's not hiding anything and wouldn't need to investigate it in the same way as if she didn't tell them.

It going into and out of her account within the same assessment period would technically make her ineligible then eligible again all within that same AP.  Closing then reopening the claim within the same AP would have no overall effect, as the assessment period would stay the same, her circumstances at the end of the AP would be the same regardless of whether she's actually closed and reopened it or not, so it's pointless admin really. 
Just important to tell them afterwards what has happened, for the reasons already given above.

silvercar

We recently helped our son with a deposit and paid the solicitor direct from our account. No problem at all, as the deposit giver the solicitor will need to do some checks on you and you will also need to write an email that it is a gift not a loan to satisfy the lender.

Yamor

Even if the money remains in her account for longer than the above suggestions, as long as the money can only be used to buy the house, and would otherwise have to be returned to you, it should be fine.

This is known as a "quistclose trust", and there is plenty case law which confirms that it is not a problem for benefit purposes.