To ask about money in trusts and benefits?

[DuckAndPancakes]

If my children are left money as inheritance, to be held in trust for a house deposit when they are adults, will it be considered as part of our savings with benefits?

It is looking like DP and I will never own our own home, increasing house prices and "poor choices" just put it completely out of reach. We've both lost grandparents in the last year and lots of talks about inheritance, money, wills etc. Is there a way that we can legally, above board, have money left for the children instead of us, so they get a chance when they are adults to own a home?

If we received lumps of money in savings, it would cancel our benefits and we would essentially have to live off that money, with no way to use it to actually better our lives or buy a home. I'd rather we were skipped and written off, so we can see them prosper.

If the inheritance has been left to your children in trust, then it shouldn’t be counted as part of your savings. There may be taxes to pay on the trust income depending on amounts.

Are you talking about your parents leaving their assets to your children rather than you?

If so then of course they can - they just write a will as such.

Obviously you’d need legal advice on how the wills need to be drafted but they could leave their assets to anyone they choose.

If the Trusts are set up before the person who set it up passes away, or it is stipulated in their will, that's not an issue.

If you are talking about putting money, left to you,in trusts for you children, then no, that would be classed as deprivation of assets.

If the money has been left to you and the person has died you can do a Deed of Variation to divert the money to a new beneficiary: your children.

But I have no idea whether this would be seen as deliberate deprivation of assets by the benefits system, or even if they would know. The money would never hit your account but go straight to your children in trust.

If we received lumps of money in savings, it would cancel our benefits and we would essentially have to live off that money
Are benefits your only income?

Benefits aren't our only income. DP works full time, earns ~£23k. Rent alone is £12,000 a year.
We get top up towards rent, child benefit and tax credits.

Before DPs grandfather passed, he told him that there was a "significant sum" for him as a deposit on a house. If that's stipulated in the will, we could only use it for that, but I don't know if the benefit system would care.

I just hate the idea of life changing amounts of money not being able to better somebody's life. I wouldn't want to take a load of money and then piss it up the wall, either. It feels like such a stupid situation.

@MarianneUnfaithful

If the money has been left to you and the person has died you can do a Deed of Variation to divert the money to a new beneficiary: your children.

But I have no idea whether this would be seen as deliberate deprivation of assets by the benefits system, or even if they would know. The money would never hit your account but go straight to your children in trust.

I'd say it would be treated as deprivation of capital, and that it would be hard to argue otherwise.

And I would never rule out DWP finding out about it, they seem to be getting better and better at sharing info with HMRC.

Someone I know got investigated by DWP when her father died. She was executor of her father's will, she and her sibling had inherited their father's house and let one of her adult children live in it rent-free for 18 months while they decided what to do with it. About two years later, when she was no longer on benefits, she was investigated and had to pay back loads of money because she'd failed to disclose that she had a 50% interest in a property.

@DuckAndPancakes

Benefits aren't our only income. DP works full time, earns ~£23k. Rent alone is £12,000 a year. We get top up towards rent, child benefit and tax credits.

Tax credits aren't affected by capital, only taxable income from it. It would only be the housing benefit that would be affected.

It's one of the many ways that legacy benefits are more generous than UC.

We've managed to avoid the switch to UC so far, but i don't think it'll be much longer before we are switched over.

I know the figure of 16k savings as far as losing out on benefits goes, but I don't know whether that's a sliding scale or a stopping point.

LakieLady
This is my worry. I don't want to do anything that'll negatively affect us or that isn't totally above board.
I was gifted a sum earlier this year and used it to pay off debts to make day to day living easier. I didn't know whether I was supposed to have declared that when doing TC renewal.

I hate claiming benefits.

I just had a quick look at the regulations, just for housing benefit - you might want to have a strong cup of tea before you attempt to look at those!

www.legislation.gov.uk/uksi/2006/213/part/6/crossheading/capital/made

Good news:
Disregard of capital of child and young person
45. The capital of a child or young person who is a member of the claimant’s family shall not be treated as capital of the claimant.

Bad news: my reading of Reg 47 would be that money left to you even specifically for a deposit on a house is included.

Bad news: Reg 49 (as I read it) would class an inheritance which you pass over to the kids by deed of transfer as "notional capital" - it's included. Hard for the DWP to trace, but failure to declare it would be fraud.

Tax credits only looks at interest earned from savings, not the savings themselves, so you're fine there.

If partner's grandfather has left him an amount, with an indication of his wishes but no legal framework to enforce them, then that money will be counted as capital for HB purposes.

A deed of variation would be seen as deprivation of capital.

I understand your frustration, owning a house would mean lower outgoings and less dependency on benefits. Unfortunately the government doesn't take that longer term view (or more likely, just doesn't care).

A rookie error. I linked to the unamended regs. They've been altered in the intervening years, but nothing that affects your position. Amended version

www.legislation.gov.uk/uksi/2006/213/part/6/crossheading/capital

They ask what savings your children have and look into the circumstances. It's to stop people putting money under their children's names, to claim benefits.

If you pay off debts quickly after getting money then you don't have to declare it. There's also exceptions around selling one house to buy another. Money used to house yourself is considered essential spending.

But you won’t always be on benefits will you? I know it seems hard now whilst your children are presumably young but eventually they will grow and you can go out to work.
Your DP could get more experience and a better job?
Depending on how old your parents are and what their health is like they could have another 20 years. You never know what situation you will be in by then and a nice inheritance might help you to buy in the future.

If you hate claiming benefits, why don't you use the inheritance to live on instead?
I don't think benefits should be used to subsidise income when you don't need it if you've got money from somewhere else.
Benefits should go to those in need until they're not in need.

Obviously, the ideal situation is that DP and I would both be working nicely paid jobs and not claiming benefits and would be able to use money towards a house of our own, which we would then be able to pass down to the children. I don't think it's all that simple to just "get a better paid job". DP is on track for promotions, raises etc within his job and his company is fantastic, leaving that behind for an unknown isn't much fun.

Being able to have a few years of the money sitting in savings until we can get our lives on track to actually be able to get a mortgage would be great, but that doesn't seem likely. If we live off the money, the longer life takes, the less deposit we have and the harder it gets again.

It just feels like actually getting out of the benefit system is disgustingly difficult. I can't just snap my fingers and find work that fits around DPs hours, or pay for up front childcare and earn enough to actually be any better off.

I just feel ashamed of the idea of generations of saving and thoughtfulness for the next would end up finishing at us, because we would have to use it to just... survive. Or to spend it all on "nice things" that will give the children lovely memories, but won't help them with their long term life.

Sorry, I think this thread is just me feeling a bit sorry for myself in what is essentially a very fortunate, unfortunate situation. I just want to make sure I'm doing the right thing and the best thing for the DC tbh.

@Ponoka7
My mum wanted to put £15k in trust each for the children, but when I looked into it, it appeared that it would mean that savings would be counted towards the HB claim.

If you use the money as a deposit for a house, then you won't need housing benefits support anyway.

It sounds like you need to look at getting a job yourself to up your income to get a mortgage.

And then hope that you are not moved to UC shortly, but it would seem that this is not much of a priority for the time being anyway.

If they are dead and you've already inherited, it's too late.

If the money is left directly to them, then it won't affect your benefits - this is specified in the Act which specifically calls out Housing Benefit.

@DuckAndPancakes

Before DPs grandfather passed, he told him that there was a "significant sum" for him as a deposit on a house. If that's stipulated in the will, we could only use it for that, but I don't know if the benefit system would care.

I just hate the idea of life changing amounts of money not being able to better somebody's life. I wouldn't want to take a load of money and then piss it up the wall, either. It feels like such a stupid situation.

I don't think that saying in your will what you want money to be used for would be legally binding.

If the money is left to you then you putting it into a trust would be deprivation of assets.

@DuckAndPancakes

We've managed to avoid the switch to UC so far, but i don't think it'll be much longer before we are switched over.

I know the figure of 16k savings as far as losing out on benefits goes, but I don't know whether that's a sliding scale or a stopping point.

Over £16,000 you lose all universal credit. Between £6,000 (I think) and £16,000 there is a sliding scale.

I'll find a link.

I know you arent asking for this advice but i think you need to work out why if you had a lump sum you would spend it... ie are/why are your outgoings larger than your income?

So if you have £20k debt and inherited £50k, why would you not have £30k left over? I get your benefits might stop but are you working towards being in a position where a lender would provide you a mortgage?

The trouble with skipping you to your kids is that they may feel obliged to loan money here and there to help you and the money goes anyway but with the stress of giving it and taking it back resentment.

[quote DuckAndPancakes]@Ponoka7
My mum wanted to put £15k in trust each for the children, but when I looked into it, it appeared that it would mean that savings would be counted towards the HB claim.[/quote]
Sorry @DuckAndPancakes (wish I was having a more interesting lunch now), you were looking in the wrong place. See para 45 of the HB Regs above. Kids' money doesn't count.