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Will a gift to help buy a home affect benefits

 

Phil R
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My client has a personal injury trust and will be using the money to purchase part of a property. As this will not cover the full purchase price, her mother is providing the balance (approximately £100K). The money will go direct to the solicitors and therefore will not pass through my clients hands.

She is currently living in rented accommodation and receiving HB. The new house will be her principle residence and obviously there will be no need for HB.

Will the money affect her means-tested benefits? If a document was drawn up by the solicitor and the mother to the effect that the money can only be used for the property purchase, would that hold water with the DWP?

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Dan Manville
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Phil R - 14 November 2017 11:26 AM

Will the money affect her means-tested benefits?

Thanks

I sorely doubt it. If it goes straight to the solicitor it can’t even be argued that it was ever in her ownership.

      [ Edited: 14 Nov 2017 at 01:10 pm by Dan Manville ]
Paul_Treloar_AgeUK
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Are you sure about that Dan? P.360 of CPAG 2017/18 states that “Money held by your solicitor normally counts as your capital”

Doesn’t provide any reference for this presumption. I would have assumed that it would be disregarded but having read that, I’m not so sure.

     
Phil R
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How about P366 of CPAG “Future interest in property”? i.e the home/capital will only be owned by the claimant when it has been purchased?

     
Gareth Morgan
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If the purchase has been agreed then isn’t there £100,000 of debt to offset?

     
Phil R
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Gareth Morgan - 14 November 2017 02:13 PM

If the purchase has been agreed then isn’t there £100,000 of debt to offset?

Will the purchase not be agreed until contracts have been exchanged. However, solicitors require funds to be in their account prior to completion.

     
HB Anorak
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If the mother only transfers the cash to the solicitor when they are close to completion there will only be the tiniest period where in theory she is the beneficial owner of a cash gift.  Even then, I don’t think the gift is unconditional - if the purchase falls through the client doesn’t get the £100,000, her mother does surely? As long as she will not be in a position where she has the right to abort the purchase and have the mother’s money paid to her instead of it being reimbursed to her mother, I think even that remote risk of a brief benefit disqualification will not exist.

     
Phil R
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HB Anorak - 14 November 2017 02:36 PM

Even then, I don’t think the gift is unconditional - if the purchase falls through the client doesn’t get the £100,000, her mother does surely?

That’s correct. The money is only to be used for the purchase of the property.

So if the money is in the account for a short period of say one week, the most she would lose is one week’s worth of benefit? And the DWP couldn’t apply deprivation of capital rules for using the money to purchase the property?

I just want to be clear.

     
Giles Elliott
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I’m more pessimistic, but I may be wrong.

Chain of events is as follows
client is on (e.g.) income based ESA
money is transferred from mother to solicitor’s client account
Under solicitors regulations authority (SRA) accounts rules (https://www.sra.org.uk/solicitors/handbook/accountsrules/content.page) client accounts are used to hold client money (13.1): client money is money held or received for a client or as trustee,  and all other money which is not office money (12.1 (a)). I’m not sure the third options is applicable, so in this case the money is either directly the clients or is held in trust for them.
If the money is the clients, at the moment the money appears in the solicitors account there is a reportable change of circs, which would result in the previous decision being superseded to reflect the increased capital. The fact that the money is only there briefly is beside the point. At this point the appellant would have actual capital. when the money was transferred into a property she was living in it would fall to be disregarded, but the DWP would be entitled to argue deprivation of capital with resultant notional capital.
The two things I need to think more about are
(1) could it be argued that deprivation of capital rules did not apply?
(2) what if the money was explicitly or by implication held in trust.
But my fear is that she would be obliged to report the change and her entitlement to means tested benefits would end as a result

     
Billy Durrant
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I would agree with HB Anorak.

If the purchase does not go ahead then the money is surely a quistclose trust.

https://www.rightsnet.org.uk/forums/viewthread/10391/

     
Giles Elliott
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Having just been reading up about Quintlose now agree with HB Anorak…
Provided that the understanding is that it is to be returned to the mother if not spent on the house

If Quintlose does apply, there would be presumably no period where it affected entitlement, even for a week.

      [ Edited: 14 Nov 2017 at 03:52 pm by Giles Elliott ]
Phil R
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Thanks for all the advice. I think I will recommend the Quintlose Trust with a caveat that this won’t guarantee the DWP will disregard the money.

     
Paul_Treloar_AgeUK
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Phil R - 14 November 2017 03:34 PM

Thanks for all the advice. I think I will recommend the Quintlose Trust with a caveat that this won’t guarantee the DWP will disregard the money.

As it’s HB, it’s the local authority, not the DWP.

     
Phil R
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How about transfer of equity following purchase. i.e. the house is purchased in both names and then the mother transfers her share to the claimant?

My concern is her ESA, not HB as this would stop anyway as she would own the property.

     
Paul_Treloar_AgeUK
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Phil R - 14 November 2017 03:50 PM

How about transfer of equity following purchase. i.e. the house is purchased in both names and then the mother transfers her share to the claimant?

My concern is her ESA, not HB as this would stop anyway as she would own the property.

Ah yes, sorry, been a long day.

     
Phil R
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Paul_Treloar_AgeUK - 14 November 2017 03:53 PM
Phil R - 14 November 2017 03:50 PM

How about transfer of equity following purchase. i.e. the house is purchased in both names and then the mother transfers her share to the claimant?

My concern is her ESA, not HB as this would stop anyway as she would own the property.

Ah yes, sorry, been a long day.

No problem Paul. It’s been a long week and it’s only Tuesday!

     
ClairemHodgson
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it’s never client’s money, it’s mother’s money.  it isn’t even her money when it’s in solicitors client account.

that’s because the mother is giving it for the sole purpose of the house, is is mother’s money until it is transferred to vendor’s solicitors. if the purchase falls through, the money is returned to mother.

the point about the solicitor’s client account raised by gareth is, IMHO, a bit of a red herring;  client account is to hold all money that is not the solicitors money.  solicitors might hold money belonging, for instance, to the other side in a dispute, or to a third party.  the money to be held to order pending some agreement or court order etc.  that money never becomes the solicitor’s own client’s money.  and that is what has happened here.  the money belongs to an independent third party (mother) and is held to HER order pending the purchase, at which point it is sent to vendor’s solicitors. 

and money only becomes solicitors money once a bill is submitted for work done (if client agrees) or if you send a bill and client sends money to pay that bill.

for instance, a client might give me money on account of disbursements, say to get medical records. it is in client account.  when i get the invoice, i pay the disbursement using the client’s money from client account (or, i pay it from office account, and transfer the relevant sum from client to office).

     
Phil R
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Thanks Claire. That’s very useful. As the money never belongs to my client, does she need to inform the DWP at all as there is no COC?

     
ClairemHodgson
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Phil R - 15 November 2017 01:41 PM

Thanks Claire. That’s very useful. As the money never belongs to my client, does she need to inform the DWP at all as there is no COC?

you client has not had a change of circumstances to report.  IMHO.

none of which means that the dwp would agree (when do they ever agree? and what understanding do they have of trusts/ownership of money/etc etc as discussed above).

worth adding that in the solicitors need the money in their client account in advance so that they can be sure they have cleared funds to send on.  even with bank transfers, money doesn’t “clear” immediately.  we all usually allow 7 days to ensure its cleared and available.  nothing worse than sending out what you don’t in fact have….. would be a massive breach of the solicitors accounts rules

     
Sally63
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could the mother not purchase half the house ie be part owner? .

As part of her will I would expect her to be setting up a trust for the disabled person so that part of the house owned by the mother could go into the trust

or

the mother could leave it to the disabled person directly in her will.

Houses are not always good things for a person dependent on benefits to own because they have large repair costs but I assume they have taken advice about all that

     
nevip
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About Quistclose.

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