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Thread: Deprivation of Capital?

  1. #1
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    Deprivation of Capital?

    Hi, have been a long-time member who lurks from time to time but after an extensive online search and several phone calls/web chats with various advice agencies, I'm hoping someone here might have some idea and/or be able to point me in the direction of someone who could help with a rather complex question about deprivation of capital for means tested benefits.

    Hubby and I are both disabled, get PIP standard daily living and standard mobility, along with income support including disability and carer premiums, hubby gets CA for looking after me and we get child tax credit/child benefit for our 17 year old who's at 6th form college plus full housing benefit and council tax reduction.

    A relative recently passed away and I've found out I'm likely to inherit about £40,000 once the probate is sorted out, which I wasn't expecting.

    I'm aware of the capital limits and know this would put us way over the £16k for being able to continue claiming our means tested benefits, but we were wanting to spend some of it on things which we see as reasonable in our circumstances and a benefit advisor (albeit not a specialist one) agreed sounded perfectly acceptable, but we're worried the DWP might not agree and will treat it as deprivation of capital.

    We're wanting to replace our 14 year old Zafira which has over 100k miles on it and seems to be costing more and more to get through it's MOT, and also our 10 year old wheelchair accessible van which is a bit too small to fit both our large mobility scooters in without actually struggling to physically manhandle one of them to rotate it enough to leave space for the other one. We were thinking of spending around £5-6k on a used but newer, lower mileage car and about £15k on a bigger, newer used van, either wheelchair accessible or a standard long wheel base van and paying for a tail lift fitting. The ones we've been looking at are about £20k but we're assuming we'd get around £5k as a trade-in for the one we have now. Having a vehicle each is a necessity because we live in a rural area with no public transport so to speak of and a teen who relies on being taken everywhere other than college so we've always had 2 vehicles since we've lived here.
    We could do to replace hubby's scooter that we bought 3 years ago second hand as it's past its best and has been damaged after being bashed during our struggles to get both scooters in and out of the van. As hubby is a big guy it needs to be a big scooter with a high weight capacity, so the one we're looking at is about £4k to buy brand new with a decent warranty on it. The batteries on the other need replacing too, which we've been told will be about £400. Hubby also needs a new recliner chair which, for his weight, again needs to be a bigger more expensive one. We're needing to replace a few smaller household items, ie the hoover, new bedroom furniture for our teen and small kitchen appliances.
    We're also thinking about getting ourselves pre-paid funeral plans. We're only in our 50's but aren't in great health and realised ages ago that we couldn't really afford to take out the ones you pay monthly on our limited income, specially knowing it'll drop by at least £85 a week next year when our 17 year old finishes college and we lose his child tax credit/child benefit. The funeral plans we've looked at are about £7500 for the both of us, but means whoever is left behind doesn't have to go into debt to pay for the other's funeral and our kids won't have to struggle and go into debt to pay for funerals either.
    It makes sense to us to do this now while we have the chance, as when our income does drop when stepson leaves college, it's going to be much harder to keep paying out for repairs and maintenance on old high-mileage vehicles when we have the chance to upgrade to more suitable, reliable and hopefully less costly to maintain newer ones, but whether the DWP see it the same way I don't know. We're not planning on splashing out on high-end stuff, fancy gadgets or expensive holidays and are just trying to plan for the future and make things as easy as possible for ourselves and the kids if one/both of us should pass away.
    I have looked at the DWP Decision Makers guides which were pretty vague and not a lot of use, so am wondering if anyone has any experience of this or can suggest where I might get some specialist advice?

  2. #2
    Senior Member nukecad's Avatar
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    There is no set of rules of what is and isn't allowed, just that it has to be reasonable spending in the Decision Makers opinion.

    However some things have been ruled allowed or not allowed by previous appeals and case law.

    So, apart from that case law, any advice anyone can give is guessing what the DM's may decide. Albeit often informed/educated guessing.

    Remember that you will be dealing with at least three DM's for different benefits. (Possibly one for each different Income Related benefit)
    The DWP for your IS - the Council for HB and CTR, - and HMRC for the Child Tax Credits.
    Although unlikely each DM could say that different things have different reasonablness for their particular benefit.

    PIP is not affected by savings/capital so there is no problem with that.
    CA does not have any savings limit (only a cap on income) so is also not affected savings/capital.

    Most of what you propose seems reasonable, ie. things that reasonably need to be replaced, but there is one proposal that would be counted as deprivation.

    Buying 'paid-up' funeral plans will be counted as deprivation of capital if it's done to get your capital below the benefits limit (or to reduce savings that are between £16K and £6k); it's one of those that has been ruled so by case law.

    A funeral plan is not something that you need to buy outright.
    Yes they are sensible things to have, but you don't need to buy them with a lump sum.
    eg. You could reasonably get monthly plans and pay for them over time out of your savings/capital, or you could just put money in a seperate savings account to pay for your funerals.

    If your only reason for buying them with a lump sum would be with the intention that the money doesn't then affect your benefits that's the very definition of Deprivation of Capital.

    Looking on Rightsnet I've found that the most commonly refered to 'deprivation by buying a lump sum pension' court ruling was in 1985, so it's a well established principle that it's deprivation.
    https://www.rightsnet.org.uk/forums/viewthread/14704

    As mentioned there deprivation also depends on the fact that you have spent the money with a view (intention) to claiming or increasing IR benefits.
    And 'increasing' in this context includes trying to avoid having benefits reduced.

    In this case that is exactly what you are trying to achive, so if lump sums were spent on funeral plans to get you below the savings/capital limit then that particular spending would be deprivation of the funds spent to buy them.

    The rest of the proposed spending still seems to be reasonable/allowed.
    Last edited by nukecad; 27-04-21 at 10:53. Reason: link corrected to go to top of Rightsnet thread
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    Thanks for your very informative reply. Our thinking behind getting the funeral plans is more to do with using what will probably be our only chance to pay up-front and not leave the other or our kids struggling to pay for funerals and getting into debt, but I can see how it could look to a decision maker, specially if there's well established case law they can use to justify it as deprivation so probably best not to risk it. I'm quite prepared for deductions for a tariff income which is fair enough, but we're just wanting to plan for the future and get the things we need which will last us a long time without falling foul of the rules.

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    A couple years back I had a large inheritance as well as soon as it was cleared and in the bank I phoned the DWP and all that happend was my benfit stopped untill it went below the 16000 I left it untill it was about 13000
    Once I showed them my Bank Statements my benefits started again plus I got money back dated from the 16000 to the 13000 which was a nice surprise my benefits were at reduced amount (not much) till I got below 6000

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    PS . ThweDWP wearn`t at all bothered what the money was spent on (a lot of it was just wasted) they were only making sure you were below the 6000. You might find this hard to believe but the DWP were really kind and helpful

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    [QUOTE=StueyR;174918]PS . The DWP wearn`t at all bothered what the money was spent on (a lot of it was just wasted) they were only making sure you were below the 6000. You might find this hard to believe but the DWP were really kind and helpful[/ But I just noticed, I never had a funeral plan Bit early for that

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    Thanks for your reply, it's really good to hear about the DWP being helpful for a change. I wouldn't be too worried about our IS being stopped for a few weeks while we bought what we needed (and obviously provided them with the receipts etc), but I have a feeling that once IS stops even for a few weeks we may then be barred from reclaiming it and forced to go on UC instead which we already know would leave us massively worse off because of the loss of the disability premiums. According to the CAB website, you're supposed to inform them of a change of circumstances within a month so what I was planning on doing was informing them just before we know we'll be getting the money that we're expecting this inheritance in the near future and what we're planning on spending it on, getting the things we need within the month of receiving it and then contacting them again to say we've had the money, what we've spent it on and arrange to send our bank statements, copy of the will, receipts for what we've bought etc assuming they'll suspend the IS while they look into it and reinstate it once they've done that with a tariff income if we're between the £6 and £16k which is fair enough. We were in a similar situation a few years ago with a court settlement I got from my ex and that worked out fine, no problems other than having to pay back a couple of weeks' IS and HB for the short period we had over the £16k in my account. I'd much rather do that than risk having to go on UC so I'm hoping as long as we report it within a month of receiving it we should be OK.

  8. #8
    Senior Member nukecad's Avatar
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    Just to explain a bit more about how 'Deprivation of Capital' and 'Notional Capital' works if you did buy the funeral plans with a lump sum.

    Ruling out any accusation of fraud - Which it wouldn't be if you told them you'd bought the plans.
    (It could be fraud if you didn't tell them you'd spent it on the plans, or said you'd spent it on something else).

    The money spent on the plans would be treated as if you still had it.
    That's called 'Notional Capital' and is added to any actual capital that you still have when working out any benefit reduction for capital.

    'Notional Capital' isn't fixed and does reduce over time.
    From the Decision Makers Guidance:
    29915 The amount of the reduction is the extra benefit claimants would get if they are not treated as having capital because of deprivation.
    In plainer language- If your benefit is reduced by £5 a week because of Notional Capital then that Notional Capital itself also reduces by the £5 a week, until it no longer affects benefits.

    Again from the DMG:
    Example

    On 5 March Mohammed makes a claim for JSA(IB). He is single and has no income or capital but the DM
    decides he is treated as having capital of £7,150 because of deprivation. The DM therefore decides that
    Mohammed is entitled to JSA(IB) of £51.20 a week. Mohammed would get £56.20 a week if he had not
    been treated as having capital because of deprivation. The DM also decides that the reduction in
    Mohammed’s notional capital is £5 a week.
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    Thanks, that makes a lot of sense. Spoke to an Age UK advice worker today who said they'd had some clients treated as depriving themselves of capital and some who weren't when they bought pre-paid funeral plans so it does seem like quite a grey area. She reckoned a lot of it seemed to depend on the age you are when you take it out, ie more likely to be accepted if you're in your 70's but if you're working age, ie in your 50's like us, then it's more likely to be frowned upon. Not great news, specially for the two of us who aren't in great health and have multiple long-term conditions but at least we know it could be risky. Not sure what we'll do, we've looked at the monthly payment plans but we can't afford a lot so wouldn't get a great pay-out, but at least it'd be something to put towards our funerals to reduce the burden on each other and the kids.

  10. #10
    Senior Member nukecad's Avatar
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    The AgeUK worker is right, although she didn't seem to know why she was right.

    The difference is that if you are in your 70's you wouldn't be on a work related benefit such as IS, ESA, or JSA (or even UC unless you are a mixed age couple where the younger partner is below pension age) - you'd be getting Pension Credit instead.

    The deprivation rules in Pension Credit are different to those in working age benefits, so buying a funeral plan is specifically disregarded as deprivation for Pension Credit.
    The rightsnet thread that I linked above touches on that in post #5 by Paul Treolar (who also works for AgeUK).
    Last edited by nukecad; 28-04-21 at 19:19.
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