ESA and Capital Rules

I have an interesting ESA capital limit case and wondering if anyone has ever had anything similar -

My client was in receipt of IR ESA from 2013 until this year. His mother passed away in January this year and he was named in her will as the Executor and sole beneficiary of her property and savings (approx £42k). Probate has not yet been issued, however the deceased’s bank have transferred the savings to my client as Executor to hold until administration of the estate has completed. He does not have use of this.

His ESA was stopped as DWP claimed he now held capital over the £16k limit on the basis that -

1) He is the legal and beneficial owner of capital exceeding £16k (as the £42k has been transferred to his account).
2) He is the beneficial owner of her property from the date of his late mother’s death (as per regulation 117 ESA Regs 2008).

Reg 117 in relation to property bequeathed in a will - “Such property belongs to the person who inherits the property from the date of death of the person whose estate is being administered and is actual capital.”

My client’s position is that the £42k is held on behalf of the estate as Executor and he cannot use this. In addition, once the estate has been administered and all outstanding debts settled, this is likely to be substantially reduced.

He accepts that he is named as sole beneficiary of the property and the regulations make it clear how this should be treated.

However, the will is currently being contested and it is alleged that a 2nd, later will exists which would substantially alter the above position. A copy of this has not yet been produced but a caveat has been lodged preventing my client obtaining probate and administering the estate. The case is likely to proceed to a full contested hearing and the outcome may very well change the overall position. My client has not had sight of the will but believes that he is not named as the sole beneficiary of the property in this will. Therefore a question mark in term of Reg 117.

My client’s argument is that he should not be regarded as the beneficial owner of the property or savings until the matter has been determined by a Court. The DWP don’t agree and have failed to re-instate his award. His Housing Benefit and Council Tax Support had both been stopped for the same reason but have been re-instated pending the overall outcome.

We are appealing the decision. Has anyone ever had a similar experience and been successful on appeal?

Thanks

Yes I have dealt with exactly this situation fairly recently although it was UC rather than ESA and the dispute was due to a relative starting a court claim seeking a contribution under the Inheritance (Provision for Family and Dependants Act).  The claim was defeated but it took well over a year and the estate incurred legal costs of £26,000. In the meantime the money was held in a bank account in the client’s name. UC eventually revised their decision on the grounds that the money was held by the client as executor and there was a dispute about the will so it was not open to her to distribute the assets to herself. The argument was strengthened by a letter from her solicitor advising in no uncertain terms that this was the position and she must not spend the money. I think I referred to R(SB)5/85 also.

As an executor, you aren’t acting in your own right, you are there to make sure the terms of the will are followed. You have a fiduciary duty towards the beneficiaries under the will. If there is ambiguity about what the terms are (or which will is valid), you need to allow these to be resolved by the court. If your client were to jump the gun and treat the money as his own, this would be a serious breach of his responsibilities.

The reference to reg 117 is confusing because it doesn’t say that unless I am losing my marbles. The quote appears to come from DMG 52174 and not the regs at all. The important part of the quote which is missed is that it applies only to specific gifts under the will. There is a distinction between specific gifts and the residuary estate.

Suppose that a will says “I give my yacht to my son and everything else to my daughter”. The son has a specific gift of the yacht and the daughter is the residuary beneficiary. The point the DMG is making is that the son may be able to immediately claim ownership of the yacht at the point of death as he will be getting that come what may. The bequest to the daughter isn’t immediately clear and her interest is just in having the estate dealt with correctly. In your case, even if there are specific gifts, I am not sure that this really applies because there are two potential wills and our putative executor has no idea what one of them says so there is absolutely no chance that it would be a good idea to start handing out gifts on the basis of the contested will.

N.b. its a while since I studied this stuff properly and I’m losing the details so whilst I think this is right in general terms, don’t rely on this for the technicalities…

Thank you Elliot - that’s really very helpful.

I agree with Elliot, they’re talking nonsense. Sec.117 of the ESA regs is about jointly owned capital so that’s not relevant here.

Has the money been transferred to his personal account though? That may be where the confusion arises from? In our factsheet Dealing with an estate, we advise that:

Except for very small estates, it may be advisable at an early stage to open a separate bank or building society account, usually known as an ‘executorship account’, into which money due to the estate can be paid. This prevents the estate’s funds becoming confused with your personal funds and makes it easier to produce the necessary estate accounts.