Benefits and Inheritance

Mandymoo_2

Hi
Just spent the afternoon with an IFA for the first time ever. I have recently inherited 35K from my late fathers estate. I'm a single working mum (part-time) in receipts of Working tax credit, child tax credit, child benefit (3 kids), housing benefit & council tax benefit. Decided to pay off loan, pay for holiday in Sept to USA inc spends, update the car - c. 12K, put £1k in trust for each kid long-term, possibly get an ISA or short term investment 3-5K, and invest the rest long term (10yrs). I have yet to cash the cheque as I am scared of being accused of benefit fraud. Am meeting witht he IFA again on Friday this week to review plan discussed and proceed. Can anyone see any obvious indicators that I a) will get into trouble for doing this with the money b) lose most of the assistance I get. Does anyone know what the current threshold is for savings allowed for HB/CTB? Will my long term investment be regarded as savings/income? Also is it better to pay the IFA with a fixed fee (est @ £600-£700, or pay by comm.)?
Any advice would be gratefully received. Many thanks.

Caz312

I first thought this would be treated as deprivation of capital and the whole amount would be counted when calculating benefits but looking at the dwp website it looks like this may not be the case

Identifying deprivation

P1.702 You will most likely identify potential deprivation of capital when examining a change of circumstances or a repeat claim. For example, when entitlement has been refused because the claimant’s capital exceeded £16,000 and a repeat claim is made soon afterwards when capital of less than £16,000 is declared.
P1.703 A claimant should still be regarded as having deprived themself of a capital resource if they have disposed themself of it by way of a gift to a third party. However, they should not be regarded as depriving themself of it if they did it to
HB(SPC) Reg 47; CTB(SPC) Reg 37

• reduce or pay off a debt they owe
• purchase goods or services the Decision Maker considers reasonable, given their circumstances, eg
  • payments to reduce/pay off a debt, eg paying a credit card account or mortgage early
  • for day to day expenses
  • to improve their quality of life, eg buying a new kitchen or car
  • for medical treatment
  • for home repairs
  • for a holiday

hope this helps

dmg24

Hi Mandymoo,

Welcome to MSE.

Paying off debts should not be a problem, and putting small amounts into trusts for the children should be ok if done properly.

The holiday and the car are subjective, and it will depend on whether they are seen as extravagant or not.

The savings and investments will be counted as capital.

The upper limit of savings for claiming HB and CTB is £16K (you will not be eligible if you have more than this amount), and anything between £6K and £16K will lead to a reduction in entitlement.

Is the money is your possession yet? If so, you need to inform the HB/ CTB team immediately, in order to avoid an overpayment.

Interest from the savings will be counted as income for tax credits. Again, you need to inform them ASAP x

Edinburghlass_2

As regard using an IFA as this should only be for setting up the trusts for the kids, an ISA and the remaining amount you would probably be cheaper on a commission basis but do check they are in fact independent and not a tied agent.

Mandymoo_2

Thanks to all who replied. The IFA (he did tell me he is independant) said that the lump sum invested long term would not be looked at as capital because I can not get hold of it if i wanted to without being penalised for stopping it early. Is this not correct then?

healy

I dont think he is correct as it would still be looked at as Capital because you had the money to begin with and the fact that there are penalties would not make any difference. I doubt an IFA knows much about claiming means tested benefits, if you want to check it is best get advice from a Welfare Rights Adviser from the CAB or Local Council.

real1314

Mandymoo wrote: »

Thanks to all who replied. The IFA (he did tell me he is independant) said that the lump sum invested long term would not be looked at as capital because I can not get hold of it if i wanted to without being penalised for stopping it early. Is this not correct then?

No, definitely not correct. The IFA won't have any idea about the impact on benefits. Any investment would be seen as capital and tying it up in a 10 year plan so that it wouldn't be seen as capital (which it probably would anyway), would alternatively be seen as deprivation.

To avoid any accusation of fraud, you should declare the capital to the local authority immediately (as you have the cheque, it's available) and then explain the spending. They will then consider whether any of your spending would be treated as deprivation.
Debts are usually ok, but a £12k car seems a lot? and a holiday to the states might not be seen as reasonable either.

It's not fraud if you declare it all to the LA and declare what you do with it. If you hide it or fail to declare any of it, it would be treated as fraud.

Mandymoo_2

Hi, thanks again for relies received. Just to clear something up - i earmarked 2.5-3K for the car, 12 k was the total that included paying off a loan, car and balance of holiday of which my kids havent had for 4 yrs and is long overdue. Saw the IFA again today, but am hanging fire until i feel happy with my decision - when I reach one. Thanks for all the advice - it's been really useful.

[Deleted User]

Mandymoo wrote: »

Thanks to all who replied. The IFA (he did tell me he is independant) said that the lump sum invested long term would not be looked at as capital because I can not get hold of it if i wanted to without being penalised for stopping it early. Is this not correct then?

definately bad/wrong advice,tbh i wouldnt have thought the average IFA would be the best person to advise on capital/benefits,if you look up community legal services(just google it)tele them and they will put you in touch with someone in your area who can best advise you on this.

scooby1001

I sold my house a few years ago and was on IS at the time. At that time(4 years ago) I declared the money straight away and my claimed was stopped because i was over the limit for savings so i had to live on my savings bearing in mind when i re-applied for IS when i got below the saving limit I had to show receipts/bank statements(I kid you not) for EVERYTHING I bought BEFORE i reapplied. I wasnt allowed to pay off my debts or was i allowed to take a holiday abroad.. To say it was a pain in the neck was an understatement but at the end of the day if youve got 35k you didnt have you have to support yourself. I only had £10,000 so it didnt last long but to be honest that amount of money invested right should last a while. I would come off means testing benefits go on holiday and buy your car pay off any debts and make sure you dont re-apply for at least 1 year other wise they will go thought EVERYTHING with a fine tooth comb. Any savings/shares weather you can easily get it or not is still your money and subject to the savings rule(same for putting money in trust for your children as it was your money).