Would this be considered a disposal of assets?

pjs493

My husband died suddenly last year. We have two young children so I’ve not been working much over the last few years due to almost back to back unpaid maternity leave, and I’m now on compassionate leave. I can’t see myself mentally able to return to my job for some time. 

While my husband was alive we got by comfortably on two incomes, and then just his when I was on maternity leave by saving less, contributing less to private pensions, forgoing holidays, keeping an old car instead of buying a newer one, etc.

We were never eligible for any benefits other than Child Benefit. I’m now also in receipt of Bereavement Support Payment. When my husband died I received a substantial death in service benefit from his workplace pension, receive a modest pension for life from his workplace pension, and I am the sole beneficiary of his estate (consisting mostly of some savings and a rental property that was in my husband’s sole name because he bought it years before we married). 

I’m in the process of selling the rental property and buying a home for myself and our children . I’m buying the property as a cash buyer (using the proceeds from the sale of the rental property and the death in service benefit). The house needs quite a lot of work doing to it (new boiler, heating, and hot water system; full rewire; replacing the 40 year old kitchen; updating the 40 year old bathrooms to include a shower).

My question is, will buying a house without a mortgage and spending money renovating it be considered as a disposal of cash assets?

My sister suggested I use an online benefits calculator to see if I was eligible for anything given that my household income has dropped significantly since my husband died. The calculator at first suggested I wasn’t eligible for anything (except the CB and BSP mentioned above) because I have too much money in savings. Once I complete the required work to the house I’m buying, most of the money I have (and the proceeds from the sale of the rental property) will have been spent, leaving me with savings below the £6000 threshold. 

Altering the calculator to reflect this showed I’d be eligible for something in the region of £800 a month in universal credit (although I didn’t input childcare cost figures which I’ll start paying in January when I pay for nursery for my youngest child so this could actually go up). 

With this in mind, if I applied for Universal Credit once the house is renovated, would I be considered to have disposed of cash assets by way of renovating the house? Or would that be considered an appropriate use of savings? 

Spoonie_Turtle

I'm sorry for your loss.

For more context, what is your current living situation?

HillStreetBlues

First, sorry for your loss
Where are you living now? what makes to property you currently own not suitable for you to live in? Is the property you are buying the average price for the area?
Deprivation of Capital can be a bit of a grey issue, as at times can be down to a judgement call as there can be many variables.

Danien

Can I ask why you're not in receipt of BSP, you're certainly entitled by circumstances, though there are limits to when you can claim if you're claiming late.

Once you've bought the house and it's your main home then the money you used to buy it would not be classed as deprivation of capital - you have provided a home for yourself and your children.

Renovations are different. It will depend if you can show that the renovations were necessary to make the home livable. So do you have a surveyors report stating that the work is necessary?  As an example if the house needs a new boiler, roof, insulation, flooring, rewiring etc then this type of thing maybe considered acceptable, but if there is a perfectly adequate kitchen and you put in a 20k kitchen, a conservatory and an extension for a craft room, then that wouldn't be considered necessary.

We used savings to have necessary work done to make a disability friendly kitchen, flooring and some basic furniture for a place we moved into and it was accepted by the DWP as not being deprivation. 

It is dependent on you convincing the decision maker that what you're doing is necessary, but I haven't so far found them particularly difficult about these things - I don't know about others' experiences.

Also remember you can apply for universal credit as soon as your savings is below £16,000. Just keep them updated on your spending on the renovations.

pjs493

Spoonie_Turtle said:

I'm sorry for your loss.

For more context, what is your current living situation?

We are currently living in military accommodation. My husband was serving in the military when he died. We can only stay here for a set grace period. However, it’s far away from my family and I want to move closer to family so I can have support and help with the children. 

pjs493

HillStreetBlues said:

First, sorry for your loss
Where are you living now? what makes to property you currently own not suitable for you to live in? Is the property you are buying the average price for the area?
Deprivation of Capital can be a bit of a grey issue, as at times can be down to a judgement call as there can be many variables.

We are currently living in military accommodation for a set grace period, so we can’t stay here indefinitely, plus it’s far away from family. 

Not sure on average property prices for the area. I just looked at how much budget I had and searched for three bedroom properties up to my budget. I’ve not bought myself a mansion, but I’m sure I could have bought a cheaper three bed terrace with small garden for less than what I’ve paid for a detached property with a large garden. Although in saying all that, it’s a fairly rural area and houses don’t come on the market very often. My options were really limited when I was looking. 

I suppose I could understand them questioning the update of the kitchen and bathrooms, but I’m pretty sure it’s not unreasonable to install a shower, and the kitchen is in a bit of a state and so old that it wasn’t designed to accommodate appliances like a dishwasher. When I first move in my fridge freezer will have to go in the dining room. I’m replacing an old boiler and re-wiring will be considered reasonable. It’s not as if I plan to spend thousands putting in expensive carpets and redecorating with £200 a roll wallpaper. 

peteuk

pjs493 said:

Spoonie_Turtle said:

I'm sorry for your loss.

For more context, what is your current living situation?

We are currently living in military accommodation. My husband was serving in the military when he died. We can only stay here for a set grace period. However, it’s far away from my family and I want to move closer to family so I can have support and help with the children. 

Grace period for loss is 1 or 2 years, however you can extend this depending on circumstances, eg if you have a house sale going through or awaiting completion of renovations.

If at the point of leaving married quarters you are effectively homeless, then your husband’s unit welfare officer (who you should know already) will be able to direct you appropriately. 

pjs493

Danien said:

Can I ask why you're not in receipt of BSP, you're certainly entitled by circumstances, though there are limits to when you can claim if you're claiming late.

Once you've bought the house and it's your main home then the money you used to buy it would not be classed as deprivation of capital - you have provided a home for yourself and your children.

Renovations are different. It will depend if you can show that the renovations were necessary to make the home livable. So do you have a surveyors report stating that the work is necessary?  As an example if the house needs a new boiler, roof, insulation, flooring, rewiring etc then this type of thing maybe considered acceptable, but if there is a perfectly adequate kitchen and you put in a 20k kitchen, a conservatory and an extension for a craft room, then that wouldn't be considered necessary.

We used savings to have necessary work done to make a disability friendly kitchen, flooring and some basic furniture for a place we moved into and it was accepted by the DWP as not being deprivation. 

It is dependent on you convincing the decision maker that what you're doing is necessary, but I haven't so far found them particularly difficult about these things - I don't know about others' experiences.

Also remember you can apply for universal credit as soon as your savings is below £16,000. Just keep them updated on your spending on the renovations.

I am in receipt of BSP. I also receive CB. But at the moment that’s all I’m entitled to due to savings. 

I had a level 3 survey done so the re-wiring, hot water and heating system, etc is mentioned in that as well as things like the need to upgrade the insulation in the loft etc. 

It does describe the kitchen as in a reasonable condition, but it doesn’t have space for white goods (there is a small washing machine in a cupboard, but it’s ancient and much smaller than a standard size machine), the integral fridge freezer is broken and there is no space for my American fridge freezer which will have to go in the dining room initially. There are also doors hanging off hinges, it’s really grotty between the joins of the laminate benches and they’ve blown in several places leaving me with concerns about hygiene regardless of how deep it’s cleaned. It’s been used as a holiday home by the sellers so works for that purpose, but for a family of three it’s not a practical kitchen. At the end of the day it’s a 40 year old kitchen and not in the best condition. 

pjs493

peteuk said:

pjs493 said:

Spoonie_Turtle said:

I'm sorry for your loss.

For more context, what is your current living situation?

We are currently living in military accommodation. My husband was serving in the military when he died. We can only stay here for a set grace period. However, it’s far away from my family and I want to move closer to family so I can have support and help with the children. 

Grace period for loss is 1 or 2 years, however you can extend this depending on circumstances, eg if you have a house sale going through or awaiting completion of renovations.

If at the point of leaving married quarters you are effectively homeless, then your husband’s unit welfare officer (who you should know already) will be able to direct you appropriately. 

In order to qualify for a funded move, we need to leave within a year. We can stay for two years (longer at Welfare discretion for the examples you give above or to avoid homelessness), but I want to move closer to family asap so they can support me and help with the children. 

I also don’t want to continue to pay rent when I can buy a house without a mortgage and not have that as an outgoing expense. I also want to move in time for the new school year in September so my children can be settled. 

The plan would be to renovate the house while living in it. Obviously replacing the kitchen will be a disruption, but family will help by bringing meals that can be heated in a microwave or having us over for dinner etc. If the weather is good I can also use the BBQ. The re-wiring will need to be done before furniture is moved in, but that shouldn’t result in too much of an overlap of having both properties.

HillStreetBlues

A question that could be asked, tying all your capital up in a property, if it's decided you wasn't entitled to income related benefit (because of DoC), how would you manage?
 

Spoonie_Turtle

There wouldn't really be any question if you were able to simply buy a property with the money.  The main area of doubt might be in renovating it - which probably seems a bit silly, as it would likely have exactly the same effect as if you used the same amount of money to buy a livable house but without the doubt of whether it was reasonable or not.

This is some of what the guidance says:

"H1796 People are not treated as having capital of which they have deprived themselves if
1. it reduces or pays a debt owed by the person or
2. they purchase goods and services and that expenditure was reasonable in the circumstances of that person’s case.
…
Onus of proof
H1825 DMs have to show the claimant's or partner's purpose was to get UC or more benefit if they decide claimants or partners have deprived themselves of capital. Getting UC or more UC may not be the claimant's or partner's predominant purpose but it must be a significant one.
So when claimants give away all their capital to a relative just before claiming UC their
1. main, or predominant, purpose may be to benefit the relative and
2. intention, or significant purpose, may be to reduce their capital so they can get UC or more UC.

What the DM decides 
H1826 DMs have to decide if the claimant's or partner's significant purpose was to get UC or more UC. The DM has to make such a decision each time claimants or partners deprive themselves of capital. So if a claimant has spent their capital on several things the DM has to decide the claimant's purpose for each act of deprivation.

H1827 Normally there is no direct evidence to show the claimant's or partner's purpose was to get UC or more UC. So the DM has to consider all the facts of each case when making the decision.
…
Did claimants have a choice when they deprived themselves of capital
H1832 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 UC or more UC. It is a fact which the DM should take into account when deciding the claimant's or partner's purpose.

H1833 Claimants or partners have no choice if they use their capital to pay
1. for the necessities of life, such as food and fuel or
2. debts or
3. the Department to repay an overpayment. 
Claimants or partners who had no choice have not deprived themselves of capital to get UC or more UC.

H1834 Claimants or partners have a choice if they
1. 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."
From https://assets.publishing.service.gov.uk/media/65d336b3e1bdec2be1322238/admh1.pdf

As you can see, it's a massively vague area filled with many different shades of grey. 

The key term for DoC is 'reasonable' - so as a rhetorical question, in your situation, do you or would you reasonably expect to soon have a choice of a suitable property that works out significantly cheaper than buying and renovating this one?
The facts of your case will include everything you've said about the house, your reasons for needing to move, where and why, property availability in the area you want/need to move to, etc.  But whether they will delve that deeply into it, I honestly don't know.