Benefits to riches advice

[Frazzledme]

Hi, I'm worrying about my brother and his partner - both long term benefits claimants. His partner has some health issues, my brother is just on a different planet although undiagnosed MH problems. Both have comfortable financial/family backgrounds which I think makes things worse.

Anyway my dad passed away and we received death in service payments which was an unexpected surprise as my dad never had a bean. My brother has now had £50k handed over to him with more to come from a modest property sale.

Obviously they can't claim means tested benefits anymore and need to be careful about how they use the money, to live off, not for a big spending spree but they don't really realise that £50k isn't masses of money when your income drops.

Wondering if there is a service that can give financial advice for their circumstance to help them understand how to use this money and have some perspective.

I know my brother is a grown man but it's stressing everyone out. Their erratic behaviour with it is worrying me. I can seriously see my brother done for benefit fraud in 12 months when it's all gone and he's trying to get tax create again!

*tax credit

When they get the rest of the money, would there be an option of them buying a house outright, so their housing is taken care of? You'd hope they wouldn't be able to piss the value up the wall by remortgaging unless they manage to turn their lives around and find regular work to support a mortgage application and if they found themselves in this position they might not want/need to take money out of the house like this.

There are various money management courses available (eg Christians Against Poverty and I think Moneysavingexpert do an online one) but if they're not of the right mindset they might not engage sufficiently to benefit, although they could do, who knows?

Would letting a trusted family member look after the money in an account they can't access and pay them a regular monthly income by standing order so it's all transparent be an option? Or the money could be put into a trust that does the same thing, but this would probably cost to set up and manage.

If they've never had any money, I'd probably 'let' them go on a spending spree with some of the money, say 5-10% especially if they want to do things like go on holiday or buy a decent car, the sort of thing they might never have been able to do before.

Another option might be to put a large proportion of the money into a pension plan, which puts it out of reach until he's 55 as a minimum.

Yes that's not exactly riches and once they're off tax credits they can't get back on they would have to go on to universal credit. Is it enough for an outright house purchase! That would be the best bet and they might be able to continue their benefits claim if they get it all in one go I suppose

You're allowed savings with tax credits so they shouldn't need to come off them surely?

There are money management courses such as www.meaningfulacademy.com but they have to want to learn.

They could put a little towards pension, £2880 each if neither has an earned income, or if they do have earned income then they can put in up to £40,000 or their earned income amount whichever is the lower. Has to be earned income, the inheritance money does not count.

They can use other tax efficient wrappers, such as a Lifetime ISA (if under age 40) which can be useful for a first home purchase. They can use ISA wrapper for up to £16,000 (assuming they do £4k to LISA), each financial year. If they ever got to a point where they were looking at claiming benefits then these accounts would need to be declared. The ISA I expect would need to be spent before benefits will be given (though some may be kept, think £6k). Not sure about the LISA as that has early withdrawal penalties so benefits calculation may treat that similar to a pension.

Will they listen to anyone for any guidance? Could you talk to them about tax efficient savings and about making a plan for how the money is to be used to benefit them now and in the long run?

I actually think that giving him this amount of money is detrimental in lots of ways. First of all it is not riches. If he comes off benefits and has to pay his rent and council tax and everything else then the money will only last for a short amount of time anyway before he is back on benefits.
What if you were to take charge of the money and feed it to him in bits as and when he needs it instead ?

There will possibly be a problem, if in a year the money has disappeared and your brother tries to claim UC as the universal credit DWP will want to know where all the money has gone - then refuse to give benefits

It won’t be fraud but how would they pay the rent?

Do they rent from the council? Or HA?
Could you suggest they pay a considerable chunk of money for their rent up front, this would give them a bit of security for a couple of years. Also look at paying the full council tax for the year. Help him set up a couple of ISA just to get the money put away and not have easy access

@RedHelenB only up to about £6k I think, it sounds like this is more and they will have to come off benefits.

If they are on the old tax credits system, then the inheritance would be classed as savings so on earned interest from the money would affect those benefits. However, I think that housing benefit would be stopped.

Thanks, this problem has cropped up again so thought I'd check the replies. All great advice! My brother is 35 can you believe so should be capable of all this but 20 years of smoking weed proves otherwise. Now his partner is asking him for big chunks of it £5k this week! I like the idea of them paying 2 years rent. Maybe that will give his partner some security. They could buy a house outright and do all sorts of things sensible people do but they have a choice of the responsibility and a fixer upper in a rough area (if they don't get jobs) or can continue living in the nicest bit of the city they live in with mates rates rent and nice 3 bed house, nicely decorated etc. I'll try and give what advice I can I think but I'm just the sensible boring one.

I agree £100k not riches although for us it's purely disposable income so looking forward to some financial freedom and nice holidays.

I think however well intentioned it doesn't really matter unless he wants to listen. Like you said he's 35 and not learnt to manage money. Doesn't matter how much money you have, if you don't know how to take of it. Plenty of free resources out there for people. I'd be preparing how your going to respond in a years time when he's blown it and can't access benefits