Another capital issue - Notional or o/p?

I have a query - there has been no decision as yet from HB I’m just thinking ahead as to how it might be treated…

Client is a single parent with 3 children all above 21 as of this month.  She receives DLA & WTC.  She suffers with MS.  Her (ex)husband is a drug addict and would spend her earnings and child benefit.  She started saving £5 each month and had 3 accounts that she set up in her name but for each child (secondary name on the accounts).  When the children turned 16 she didn’t want the husband to get hold of the money so invested £10K in a Bond and £10k in an ISA.  This money was never touched as was the child benefit and other money that she had kept safe for her children and was for their futures.  She never informed HB as the money as she thought of it was for her 3 children.

Last week she received a letter from HB (dated 02/09/14) advising that the HMRC had found a Barclays account which they knew nothing about (this was the Bond). On 01/09/14 the Bond matured and on 08 Sept the ISA matured.  Last week she deposited the Bond & ISA into 3 separate accounts for her children which they now have control of as they have reached 21.

How is HB likely to treat the Capital?  Will they say she had notional capital from when she transferred the money to her children and/or state that she has been overpaid from 2011 when her income was above £6K and later when it went above £16K and she lost her entitlement to HB?  She never had any intention to hide the money from HB and was unaware of the capital limits (only received WTC & DLA).  If HB states that she has been overpaid would it be worth her challenging this due to her intentions and/or ignorance of the capital limits?

Your thoughts would be most appreciated :)

It looks like misrepresentation, if she signed a document wherein she stated that she had no capital/capital under £6,000. Was the money accessible? If not, then this is a question about whether it was disposed of deliberately in order to secure benefit entitlement. If it was, then it’s money she had that she failed to disclose. The money was hers and she was holding it for her children’s future benefit.

Then there’s the question of what happened when the accounts matured. If it was not accessible prior to maturing, it was after. If, now, her kids have the money, then it’s down to whether it’s notional capital or not, namely whether she disposed of the money to secure benefit entitlement. It looks like she didn’t.

So, now she, presumably, has capital under £6,000, I don’t see why she should not be taken into account as her decision to give money to her children does not appear to have been significantly motivated by an intention to secure benefit entitlement.

O/p’s are often worth challenging as off-setting may not have been applied.

I’d say she is on firmer ground with the notional capital question than the actual capital one.

“Last week she deposited the Bond & ISA into 3 separate accounts for her children which they now have control of as they have reached 21”.

Whose names were these accounts in?

Have you got access to the Maxwell& Sweet law books( I can’t tell you the pages as I don’t have access anymore)but the blue book has a lot of excellent commentary on Benefical owenership, notional capital,primary purpose for disposing of the capital along with all the case, which will answer all your question i have won many acase using the blue book.

My initial thought was that while she was keeping the money in accounts for her children it could be argued that it was not hers; she was holding it in trust for her children. 

However this will be a problem, once she put the money in an ISA.  I would imagine that you are not allowed to put someone else’s money in an ISA in your name. 

Then there is the issue of deprivation of capital when she moved the maturing accounts into accounts in her children’s name.  She may well have not done it to deprive herself of capital but I suspect HB will not see it that way.  From the dates you give it seems that she moved the money soon after she received a letter from HB asking about the account(s).

While trusts (apart from trusts in land) do not have to be in writing, setting up bank accounts in a person’s own name and putting your own money into them for the purpose of giving it to your children at some point in the future does not, in my view, create a trust.  If it was that easy then everyone would do it.  Doing it with Child Benefit might but I doubt it.

Thanks everyone.  Sorry for not responding sooner but my email alert to your applies was not working.  To answer an earlier question, the ISA & Bond’s were always in her name until she transferred them a couple of weeks ago. 

Waiting to here from HB…

Re. the overpayment, I would say that it’s worth appealing and getting the client to produce as much evidence as possible to demonstrate that the money was put aside for the three children. Does anyone know how much discretion there is in the HB regs to ignore capital that belongs to someone in a legal sense (and doesn’t come under one of the categories of capital that is ignored in the HB regs)?

As mentioned by someone else, I think your client is less likely to win the overpayment issue than the notional capital one, but it’s worth a try.

Re. the notional capital, the LA has to prove that the disposal of capital was ‘for the purpose of securing entitlement to benefit’ (see wording of Reg 49 (1)). It’s not enough that one of the outcomes of the disposal of capital was entitlement to benefit.