Hi,

Am looking for a bit of advice regarding a situation I haven't come across before.

Tenant was left a substantial amount of premium bonds when her father died in 1995. She was in receipt of HB in 1995 and has been continually since. She never informed the LA she had been left the premium bonds. In October 2007, the tenant obviously felt guilty and informed the HB department that she had the premium bonds. Tenant was interviewed under caution and confessed all about how long she has had the bonds. HB decided not to prosecute but have obviously amended the HB entitlement back to 1995. The premium bonds means she now has in excess of £16,000 so is no longer entitled to HB. Tenant has made an arrangement with LA to repay the overpayment on a weekly basis.

Tenant has subsequently spoken to another tenant who has advised her to cash in her premium bonds and repay the overpayment in full. By doing so, this will reduce her capital to substantially under £16,000 and then she will be able to reclaim HB.

In the above situation, could the LA treat this is deprivation of capital on the basis that by repaying the overpayment in full (when a previous arrangement was already in place), she has deliberately deprived herself of capital in order to take advantage of the benefit system?

Any views or advice on this would be gratefully received.

In short, if she is under 60 yes, over 60 no. There is always deprivation once a person divests himself or herself of capital. The question is one of intention. Was it a significant operative purpose (as opposed to the only purpose) of the deprivation to avail oneself of HB? That will be a question of fact in each case.

With regard to repayment of debts the starting point is, is the debt immediately due? If the answer is yes then there might not be a problem. If the answer is no then other factors will need to be considered. For example, it may be legitimate to repay the debt early to avoid high interest charges.

So each case will turn on its own facts. There is a commissioner’s decision, which held that (in that case) a person who new about the notional capital/income rules (I can’t remember which) but went ahead and deprived themselves anyway was not caught by the rule. But I suspect that that is a unique case and I would be wary of undue reliance on it.

The reason why its ok if you’re over 60 is that the rules are different with regard to repaying debts and that is that there is no “immediately due” ‘rule’.

A good starting point is to read the commentary to reg 51 of the IS Gen Regs.

And just for completeness the test is not "taking advantage of the HB scheme" as that implies an element of bad faith but of "availing oneself of benefit".

Regards
Paul

Thanks for this Paul, really helpful. Thanks for the pointer towards reg 51 of the IS General Regs as well.

Regards

John

As a matter of law premium bonds are not transferrable on the death of the holder - they have to be cashed in. The story you tell suggests your client never told the Bonds and Stock office of the death and is probably not entitled to any prizes, unless she cashed them in and bought bonds in her own name.

If that's the case Ariadne then would be true that, technically, the bonds wouldn't belong to the claimant - they'd belong to the deceased's estate?

Look at CIS/2282/2000 and R(IS)5/99.
These will give you guidence on immediate liability to repay.

It was also covered more recently in CIS/3657/2007

Was there a will? If so, was it the father's actual premium bonds that were gifted in the will or was there an instruction for the executors to purchase premium bonds in the name of the tenant you are advising?

The terms and conditions that you have to agree to when you buy premium bonds state "Bonds are not transferable at any time. Following the death of a holder, the value of the Bonds will form part of the deceased holder’s estate" (from the NS&I website)

Its a tricky one, though. Could it be one of those situations where you haven't applied for capital that you would get if you applied for it, so they imagine you have it anyway?

Thanks to everyone for their replies. Just shows how a simple query can become more complex very easily doesn't it!

I have spoken to the tenant who has read a copy of the will. In the will, it specifically states that the Premium Bonds are to be left to the daughter. The will was prepared by a solicitor, so another thought is 'should the solicitor advised that premium bonds cannot be transferred'?

Not sure if anyone knows the legal position regarding this but how does someone stand who thought they had premium bonds in 1995 but they weren't in her name. Can they be changed retrospectively and could she claim any potential prizes that have accumulated since 1995?

Also, if has been suggested in previous postings,could it be worthwhile appealing to the LA against the overpayment on the basis that she does not have the capital, that the capital actually belongs to the estate of the deceased or would the LA argue that had she sought legal advice she should have been advised to return the premium bonds and have them reissued in her name?

Once again, thanks to everyone who has replied with comments already and I welcome any new comments or thoughts on this.

Regards

John

There might be a professional negligence claim there - the solicitor who drafted the will definitely should have known that the gift would fail. It's so hard to quantify any loss, though. She needs advice from someone experienced in prof neg.

She can only retrospectively claim the prizes that were awarded in the 12 months after her father's death, I think. After that they are invalid and attract no prizes.

As for appealing the decision based on having no capital during the period, I'm thinking this might fall under s42(2) HB Regs because she has failed to apply for money to which she was entitled.

But that raises another point. Would she have been entitled to all the money from cashing in the bonds? It depeneds on the wording of the will. What type of legacy was used to gift her the bonds? Was it a specific legacy, i.e. "all the premium bonds as I shall own at the date of my death", or a general legacy, i.e. "£XXX worth of premium bonds". If its the former the gift would fail and fall into residue and their value would be distributed in accordance with the gift of residue. If the latter, the executors should have bought £XXX worth of bonds in your tenant's name from the estate of the deceased (after cashing the bonds in)

What did the residuary legacy in the will say?

do i get the feeling she didnt' go for legal advice after her father died? as if she had, a lot of this would have been resolved then.

were there other beneficiaries? if so, then she does need professional help now if she didn't get it then! to make sure that future dealings with what are still estate assets are correct etc...

s. 42 might apply but only subject to the usual deprivation rules about the intent to deprive to take up or increase benefit entitlement. Pure ignorance of the rules about premium bonds would not amount to a deprivation - although that wouldn't stop an LA tryin' it on - so to speak...