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IR ESA. Buying home with a loan in partner’s name. Any issues with capital/savings?

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JAS1
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Hi,

I have a query from a client on IR ESA support group (and PIP enhanced both components). Currently has no savings at all. Lives alone. Has a partner who lives elsewhere. Rents from the council.

Client is going to receive a personal injury claim of £12,000. I know this is ignored for 52 weeks for ESA so shouldn’t be a problem.

Client wants to use the personal injury claim to buy her council flat under Right to Buy. She can’t get a mortgage due to living in a concrete tower block above the 5th floor so has to buy outright. She has 1 month left to do this (she is waiting on the fire safety report in light of the recent tower fire so I am hoping this comes through in time!)

Anyway, she needs a further £23,000 so needs a loan. She can’t get a loan due to no credit rating.

What she wants to do -

Her partner takes out a loan for £23,000. They then immediately use the loan plus the personal injury to buy her flat. She will then pay her partner back for the loan as a personal arrangement.

My initial thought was that this shouldn’t affect things, but I want to double check. The loan money will only be in her account for a short while until the house sale goes through, hopefully only a few days to a week between her partner transferring the money to her and her buying the flat (so she says, I’ve never bought a house so no idea if this is realistic time frame).

Can anyone just confirm for me that she is all good with this plan and isn’t going to run in to any problems with ESA? She will obviously notify DWP of all changes but wants to know in advance. What happens if there is a delay and the money is sat in her account for weeks, will her claim be stopped as she will be way over the savings limit?

Cheers in advance

      [ Edited: 13 Jul 2017 at 02:49 pm by JAS1 ]
ClairemHodgson
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JAS1 - 13 July 2017 02:46 PM

Client is going to receive a personal injury claim of £12,000. I know this is ignored for 52 weeks for ESA so shouldn’t be a problem.

It should go into a PI trust, then if she ever sells the flat (assuming it ends up being purchased) she can still have the capital free and clear.  and worth getting advice as to whether in those circs any appreciation in capital could also go into the trust.  Her PI solicitors should be advising her about this in any event.  worth the money she’ll spend to set the trust up to avoid any potential future problems (plus, of course, if in the future she needs social care/care home, what was in the trust can’t be used by local authority in their means assessment re that)

RE THE REST OF THIS ANSWER - I AM NOT A PROPERTY LAWYER but think i’ve covered the essentials in my points below.

JAS1 - 13 July 2017 02:46 PM

Her partner takes out a loan for £23,000. They then immediately use the loan plus the personal injury to buy her flat. She will then pay her partner back for the loan as a personal arrangement. [/qhote]

massive risk for partner who needs independent advice and will probably need to protect himself by way of taking out a charge on the property at the least.

JAS1 - 13 July 2017 02:46 PM

My initial thought was that this shouldn’t affect things, but I want to double check. The loan money will only be in her account for a short while until the house sale goes through, hopefully only a few days to a week between her partner transferring the money to her and her buying the flat (so she says, I’ve never bought a house so no idea if this is realistic time frame).

Would make more sense if partner sent the money direct into the solicitors client account.  the solicitor will, in any event (money laundering regulations etc) want to know the source of the money and will need the partner’s ID.  or even, since he needs independent legal advice in any event, into his own solicitors client account and then on to your client’s client account.

thus both protecting your client AND protecting the partner.

     
JAS1
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Thanks Clare.  So purely in terms of impact on her ESA, do you happen to know -

Is there a specific amount of time for money to be in someone’s bank account for it to ‘count’ to JC+/DWP? Sorry can’t think of better phrasing. If it’s sat in her account for a week or two surely it’s going to affect her claim? What about a few days? She is worried about this happening and then her claim getting shut down and having to reapply (and then the dreaded face to face assessment again etc).

“It should go into a PI trust, then if she ever sells the flat (assuming it ends up being purchased) she can still have the capital free and clear.  and worth getting advice as to whether in those circs any appreciation in capital could also go into the trust.  Her PI solicitors should be advising her about this in any event.  worth the money she’ll spend to set the trust up to avoid any potential future problems (plus, of course, if in the future she needs social care/care home, what was in the trust can’t be used by local authority in their means assessment re that)”

Sounds like all this is more of a legal query I can pass on to the experts. I did read about it being permanently exempt if in a trust. I guess that’s a query for her solicitor, not me! The reason I didn’t think this would be an option is that she needs to use the personal injury money to buy her flat straight away, sorry if this wasn’t clear. She is going to spend it pretty much as soon as she gets it.

“massive risk for partner who needs independent advice and will probably need to protect himself by way of taking out a charge on the property at the least.”

“Would make more sense if partner sent the money direct into the solicitors client account.  the solicitor will, in any event (money laundering regulations etc) want to know the source of the money and will need the partner’s ID.  or even, since he needs independent legal advice in any event, into his own solicitors client account and then on to your client’s client account. thus both protecting your client AND protecting the partner.”

I will let her know this info and advise she seeks legal advice on the matter.

     
ClairemHodgson
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she still needs a PI Trust.

with a PI trust, it’s set up and the money is paid into the TRUST bank account, which is separate from her personal bank account.

She needs to contact her PI solicitors ASAP.  Frankly, given the level of compensation she’s expecting, and that they MUST know she’s on benefits, they should already have advised her re this.

You don’t say whether she already has a conveyancing solicitor - she needs one of those too…..

ditto her partner.

     
ClairemHodgson
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Frenkel Topping are the firm I normally refer clients to where a PI trust is needed/recommended.

I rather think Nestor can advise on them too (one of their staff is on the forum) but i’m not sure about that.

     
JAS1
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Thanks Claire. It is clear she needs legal support around the PI payment and the flat purchase. I will direct her back to her solicitors for these queries.


I think I will tell her to just let ESA know about her plans and get it recorded. If her partner pays the client direct, as you suggest, then it shouldn’t affect her ESA anyway.

Cheers

     
ClairemHodgson
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JAS1 - 14 July 2017 02:11 PM

. If her partner pays the client direct, as you suggest, then it shouldn’t affect her ESA anyway.

Cheers

that wasn’t what i said.

i believe i said partner needed independent advice and that there may be a lot to be said for partner’s money going from his solicitor to her solicitor.

     
JAS1
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Sorry, crossed wires. Either way, that is evidently not something for me to advise her on

It was just how all of this may impact her IR ESA that she was concerned with. Although the practicalities of how her and her partner transfer these large sums of money will be pertinent to the ESA query of course, depending on what they end up doing.

     
ClairemHodgson
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JAS1 - 14 July 2017 02:38 PM

Sorry, crossed wires. Either way, that is evidently not something for me to advise her on

you’re right in that it’s not for you to advise her/her partner on the conveyancing/load/etc side of things, that’s for their respective conveyancing solicitors. 

But surely, given that you are advising re impact on IR ESA, you do need to advise about the potential effects of the various ways that could be used to deal with the matter?  (on the assumption that the PI settlement moneys go into a PI Trust without passing through her personal bank account, since that’s the simple bit).

, your advice to your client needs to be based on the impact if the purchase DOES happen and on the various points that may be taken depending on the way in which she and her partner deal with the issue.  Hence my suggestions

So surely you just need to look at the rules re capital and apply them to the various scenarios - whilst bearing in mind that her operative purpose is, surely, to secure her accommodation and not to obtain benefits?

in any event, i’d avoid any situation where partner’s money passes through her personal account.

     
SamW
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I agree with everything that Claire has said - looking at the situation as a whole there are much bigger issues than the ESA claim that the client (and her partner) should be resolving.

These issues aside my 2c on the ESA would be…

Worst case scenario, if the capital is counted it shouldn’t result in the claim being ‘shut down’. It would be a credits only claim for the period where the money is in her bank account. Once she’s bought the property the payments would resume.

Whilst it is in her account you could argue that it is there under a specific purpose trust and that it should still be treated as belonging to the partner. I think the important question in this argument is what would happen if for some reason the purchase fell through - would the understanding be that the money would be returned to the partner immediately?

Also worth double checking and advising if there is any risk of the DWP treating them as LTaHaW as him taking out a 23k loan to help her buy her flat suggests a pretty high level of commitment if he can’t clearly show that he does not live with her.

     
ClairemHodgson
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SamW - 14 July 2017 03:03 PM

Also worth double checking and advising if there is any risk of the DWP treating them as LTaHaW as him taking out a 23k loan to help her buy her flat suggests a pretty high level of commitment if he can’t clearly show that he does not live with her.

indeed

far be it from the DWP to begin to understand that, to be living together, one has, in fact, to be living in the same house!

there is case law on this (re those who are not married)

     
Sally63
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“Worst case scenario, if the capital is counted it shouldn’t result in the claim being ‘shut down’. It would be a credits only claim for the period where the money is in her bank account. Once she’s bought the property the payments would resume.”

Would it? or might it be intentional deprivation of capital? It’s not necessary—she’s already got somewhere to live and after the money passes into her bank account it will be (briefly) hers before she spends it.

One could foresee an unpleasant contre-temps with the DWP over this

I think the only advice I would give might be “take legal advice”

     
JAS1
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Thanks again Claire, info greatly appreciated - “in any event, i’d avoid any situation where partner’s money passes through her personal account.”

Sounds wise, I will advise her accordingly. I will look up the case law on non married couples not living together.

SamW - “Worst case scenario, if the capital is counted it shouldn’t result in the claim being ‘shut down’. It would be a credits only claim for the period where the money is in her bank account. Once she’s bought the property the payments would resume.”

I did think this too, but I have had 2 cases recently where DWP have shut down ESA claims instead of transferring to credit only claim. This then required appealing, or a new claim, and the woman in question is living in fear of another face to face assessment or having to go to court (her review date currently isn’t for another couple of years).

“Also worth double checking and advising if there is any risk of the DWP treating them as LTaHaW as him taking out a 23k loan to help her buy her flat suggests a pretty high level of commitment if he can’t clearly show that he does not live with her.”

Hmm good point. You’re right it’s not exactly a small amount of cash. She did confirm the partner lives completely separately but I will double check the details and look at the case law as Claire suggested.

Sally63 - “Would it? or might it be intentional deprivation of capital? It’s not necessary—she’s already got somewhere to live and after the money passes into her bank account it will be (briefly) hers before she spends it.”

This is what she is concerned about, whether it will be treated as deprivation of capital. My thoughts were that using money to buy the flat she is living in is pretty legitimate, but that wasn’t based on any evidence and so am not 100% confident she is in the clear. I guess as Claire said, it would be sensible for the money to not go in to her personal account at any stage.

     
ClairemHodgson
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I will look up the case law on non married couples not living together.

i meant, of course, that there is caselaw where people have won living together appeals because they weren’t living together.

I had 2 LTAHAW cases a few years ago where the DWP itself admitted in its own submissions that the two people weren’t living together, and there was no record of them having done so, and all records showed separate addresses, finances etc..  in one of those, we still ended up having to go to UT.

 

     
JAS1
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That’s ridiculous. It’s often hard to give a client a confident yes or no answer when they ask if something is likely to happen/not happen when it comes to DWP. So much of what DWP does is totally beyond logic and also at times against their own guidelines and they always surprise me with a new silly decision.

     
WROTricia
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Sorry this isn’t strictly in answer to your query I just wanted to ask if the deprivation of capital would be a major issue in cases like this where buying the property outright means no further entitlement to HB, no mortgage interest, surely if you deprive yourself of capital and end up with a lower benefit income as a result then the argument that you did so to access benefits is null and void? Just wondering if the DWP would look sensibly at issues like this or am I being wildly optimistic….