Can anyone help?
I have a client that is in receipt of IS. She is looking at selling her current property and moving into a new property using a shared ownership scheme. Within this scheme all her debts will be paid off, and she has been requested to keep £5000 for a “rainy day” fund. This is purposely under the £6000 limit.
My client would like to hold back an addition £10 – 15k to buy a car, get furniture for the new property and possibly take her disabled son on holiday, stating that this is the only opportunity she is going to get to do this.
Could anyone advise me on now this will effect her IS/HB. I would guess that she will spend this money in the first month. Does anyone know if there is a given time period (like equity release schemes) to spend the money.
Any help would be greatly appreciated. Thanks.

I'm not sure what you mean by "a given time period (like equity release schemes)". I don't know of any special rules for ER schemes.

IS is a weekly benefit and it's your circumstances in that week - each week that decide on entitlement and amount.

If she keeps £5000 + £15000 then she'll be over the capital limit at some point with all the consequences of that. The expenditure may, in itself, be reasonable but until the money's spent it will be capital.

If she is spending some of the money with the express intention, even if it is not the main reason, of bringing her capital below £5000 so as to qualify for benefits, she will fall foul of the notional capital rules and will be treated as still possessing the money she no longer has.

You will need to be sure that any money she does spend can be fully justified without taking beenfits into consideration. The fact that you are asking this question shows that benefits are in the frame and thus might raise suspicions in a suspicious mind (naming no government departments or local authorities).

Is she being put under pressure about her debts? Paying debts which have become immediately payable (eg becasue she has been served with a default notice, or is being threatened with litigation) would certainly be justifiable, and so would buying things for her new house if they are really needed. The rules for people under 60 are less generous (with pension credit you can pay your debts even if they are not immediately payable), and since equity release schemes are normally only used by older people that may be what you are thinking of.

If she needs a car that too is fine, but probably not a luxurious expensive car. You say she has a disabled son and if he has difficutly getting in and out of a normal car this could justify the need to find one he can access, even if she could have got something cheaper. A holiday could be fine too but not a round the world cruise - more the sort of holiday a single mum with a disabled child could reasonably expect to have (bearing in mind that his disability may impose extra expenses anyway).

So do be careful and don't let the benefits capital rules drive the agenda, or there could be trouble.

And keep all receipts.