Savings in my name stopping Universal Credit despite low income

[slowingdown1]

can anyone more financially savvy than me help?
Recently divorced, ex DH pays minimum child maintenance. Have a low
income due to home working in low demand role so I can care
for 2 x disabled children. Yearly
salary is £31k before tax, I save £100 monthly into pension. I claim Scottish disability payments for both kids which go on private treatment / therapies. Each month I scrap by and have a constant low credit card debt despite my best efforts. I have savings that were gifted to me by my mum as long-term financial security of £80k. Although the money is legally in my name, I have made a firm promise to her that I will not use it, so morally I do not feel able to touch it until she is no longer with us.
My current income is low, but because these savings are in my name, they are preventing me from applying for Universal Credit as above
the threshold.
I understand I can’t eg transfer the savings into trusts for my kids as this would constitute deprivation of capital. I can’t ask my mum to eg take it back for the same reason.

It's not Catch 22 - you have 80K

Hi OP, I dont think paying of existing debts eg mortgage would be seen ad deprivation as assets.

I think the big challenge is, you do not see this money as yours, UC do. It must have accumulated some interest, and must continue to do so. Whilst you are stuck unsure what to do, can you give yourself the monthly interest to top up your income?

Paying debts eg mortgage is not deprivation of capital. Sorry but struggling month to month while worrying about morals of a promise is madness.

You have been given bad advice by CAB you can use any savings to pay of debt, if you have 80k nothing to stop you paying between 65-74k off the mortgage or other debts and leave savings of 6-15k then claim UC. Clearing debt is not classed as a depreciation of assets. Whether you would be eligible for UC when earning 31k is something you would need to run through a calculator like entitled to. Also child savings are not classed as yours if they are in an account that can’t be accessed by you e.g. junior isa.

Stop making getting UC your goal, forget about it, use the money wisely, wet room, debts, better car. Look at ways that the £80k will reduce your outgoings

My sis is in a similar (but not the same) situation , she is due an inheritance and on UC and claims disability (pip) . She is going to buy her council house with the money when she gets it . She’s sought advice and has been told all the time she has the money her UC will stop , but she can apply for it again once the money has gone. She just wants financial security for herself and owning her own home will give her that . Maybe get advice about paying off your mortgage ? I’m sure your mum would be happy for you to do this now as not having a mortgage will save you a lot of money in the long run .

Im guessing to minimise inheritance tax although if she dies within 7 years of giving it, some tax will be due too

Side question... do you have social care support and receive any direct payments? They should be helping with the carer costs - though I acknowledge the reality of that battle. Ditto, is tax free childcare any help, as it applies to age 17 for disabled children - not sure about in Scotland though.

A quick google asking about UC and deprivation of capital brings up the government page that covers this issue.
https://www.gov.uk/guidance/universal-credit-money-savings-and-investments#reducing-your-money-savings-and-investments-on-purpose

It specifically says-

You have not knowingly reduced your money, savings and investments if it has been used to:

• pay off or reduce a debt
• pay for goods and services that were reasonable in your circumstances

The same wording is used on the turn2us website too.

I don't think its a case of you being greedy and wanting to keep the £80k, I think it's a combination of you receiving poor advice and fearing that you can't spend it at all and the guilt you feel over the promise you made to your mum.

It would be perfectly reasonable for you use the money to clear your credit card debt or withdraw an amount monthly to make up your shortfall. It would be perfectly reasonable to use 10k a year for 8 years, what they are trying to stop is people spending the money on luxury goods in a short period of time, think top of the range cars and several exotic holidays. Would a two seater sports car be reasonable for your circumstances? No. Would a decent car suited to your kids needs be reasonable? Yes

I think it might help if you could reframe the promise you made to your mum before your circumstances changed. I'm sure she would want you to spend the money on what you need for your kids now.

If it was me I think I'd start by clearing the credit card and seeing how much that adds back to your monthly budget. I'd then look at getting a wet room fitted as that could help prevent you getting physically injured as you kids get bigger.

If you don't feel comfortable putting it all into your mortgage then you could allocate a monthly amount that you withdraw, perhaps to cover a specific cost such as council tax or house insurance. That way it would be clear in your mind what it had been used for and you would still have a buffer for emergencies such as house or car repairs or replacing equipment for your kids.

Having a mum whose not stressed about money will be beneficial for your kids in the long run too.

You said that your DH is paying minimum maintenance, is there any way he would / could pay a bit extra directly to covering the cost of the kids therapy? That might help a bit too.

I understand where OP is coming from - her mother wanted the money to be a safety net for the disabled children when they grow up and when OP might not be around.

It is what it is though, 80 grand in the bank.

While it has definitely been established that paying off your bills with your own money etc will not be deprivation of assets, I do wonder if you should be cautious about spending it all quickly (ie large chunk off mortgage etc) in case your mother does need care and your brother does not or cannot pay for it all.

As others have pointed out I’d be more worried about your mother getting caught out with the deprivation of assets issue. Diagnosed with dementia and then a week or so later gave away 80k.

Are you absolutely sure the reason she said don’t spend this until after I’m dead isn’t because she was aware that deprivation could be an issue and she wanted to ensure it wasn’t clawed back by then before that for her care….? Because in all honesty there’s zero reason someone would say don’t touch this until after I’m dead. She could be dead a week after saying that or 20 years. It’s a very strange condition to put on money.

OP please explain your refusal to live off the £80k? That's a life changing amount of money for a large percentage of people in the UK.

Ok I think you have misunderstood the advice here.

Blowing the money in a way thats just to get rid of it (big gifts, giving to the kids, lots of holidays, cars etc) would be deprivation of assets.

Using the money on things you need is absolutely fine as is putting it into your mortgage in order to reduce your mortgage payments.

They arent saying you cant touch the money, think about it logically that would make no sense. You have a large chunk of money so they say we cant help and if you spend yours, we wont help. No what they are saying is use the funds you have, to live on and then when you run low you get help. Blow it all quickly in order to appear to need help and you dont get it. But paying off a large chunk of a mortgage to reduce payments is absolutely a smart thing to do, as is using it to live off of.

However if that gift was under 7 years from when your mum gives it, to when she passes, you will be liable to pay tax on the money you received so I would keep in mind you may have a tax bill. I assume she gifted it to you in order to try and avoid inheritance tax but you will still potentially be liable if she passes within 7 years of gifting.

An interesting thread with some very good advice given, and not as clear cut as the ops opening post leads us to believe. I wish you all the best op and truly hope you get your wet room 💐

At the time your Mum gifted it to you for what sounds like DC futures you should have put it in DC name and tied it up for 10 years in a bond. You put it in your own name now you won't be entitled to UC.

Surely the £1756 includes the payments that you already receive for your children / PIP and child benefit, therefore the UC amount would be minus this, which may or may not be less than what you could receive from investing the £80k well.

they also can’t say that the £80k is being used as deprivation of assets if you are using it cover normal monthly costs. It would be if you bought an unnecessary new car / kitchen / bathroom etc, unless you can show that you need them to meet the needs of your children (and probably would need to have gone through an OT assessment).

It really isn't as cut and dried as that. I retired last year and worked in welfare rights for over 20 years.

I've had a few cases where the DWP has looked into spending capital, and things like buying a mid-range car, spending on necessary house repairs and having a a reasonably modest holiday have been deemed acceptable. Clearing or reducing credit card debt and a loan has also been considered ok, as has some spending on hobbies, and replacing things like washing machines and cookers, as long as they're not extravagant.

The test is "intent". If they think that someone has deliberately spent a shedload of money so that their capital is below the £16k cutoff, they can treat it as though they still have the money. If it's reasonable, and it's for something they need, that's fine.

One client of mine had spent £3k on a high end hi-fi system. He was a very isolated man with significant mental and physical health issues and music was his passion; the DWP didn't regard that as intentional deprivation of capital, nor his purchase of a fairly expensive bed, which he needed because he had dreadful spinal problems. I've also had the purchase of a £10k second-hand car disregarded.

It's a notoriously difficult area to give advice on, because what is "reasonable" is a judgment call and whether the "intention" behind the spending is deliberate "deprivation of capital" is really a matter of opinion. I suspect that the CAB adviser was giving the absolute worst-case scenario.

In my opinion, dipping into that money because you don't have enough to live on is unlikely to be considered intentional deprivation of capital. After all, if your income is so low that you would be entitled to UC if you didn't have the money from your mother, your income is below the level that the government deems necessary for you to live on. Therefore, you're spending to exist, not to get benefit entitlement.

Also if she needs care because of dementia, then you or your brother could look into Continuing Health Care, this then gives funding for care if its needed for health rather than old age.

This is the official government advice - never know why people cant just look it up. https://www.gov.uk/guidance/universal-credit-money-savings-and-investments#reducing-your-money-savings-and-investments-on-purpose

You will see it says "You have not knowingly reduced your money, savings and investments if it has been used to:

• pay off or reduce a debt
• pay for goods and services that were reasonable in your circumstances"

Therefore the first thing you should do is pay off any debts other than the mortgage that you pay interest on. Then you pay enough off the mortgage to take your savings down to 5k. A mortgage is a debt and anyone saying you cant pay it off is just wrong.

So what the hell are you waiting - and losing money - for? Your mother would agree this would benefit you, if she finds out. You dont have to tell her.

OP, it would be sensible to ask a local solicitor specialising in this area of the law to advise.

If the gift of the money was expressly for the children's use at a later date, it should not be money available to you personally.

It would have been best to take legal advice when this was set up, as the money could have been placed in trust for them. It should not have been in an account to which you have access.

There is also the question of your Mum's ability to make the correct decisions at the time regarding her finances.

https://solicitors.lawsociety.org.uk/

This thread is just staggering.

If you have vast amounts of cash in the bank you do not need to claim benefits. How hard can that be to understand?

The constant "on the take" attitude is what's breaking the country.

I am disabled but a reasonably high earner (£75k) so I don't claim any benefits (even PIP) because I don't need them. It's just greed.

Benefits should be a safety net not a cash cow

Using the money on living expenses which you can’t otherwise afford is not ‘frittering away’ the money!

I’m sure your mum would rather you use the money to be able to pay bills and not go into debt each month, than to save it and struggle to live daily for how many years!

Frittering it away would be spending it on unnecessary things like Starbucks and getting your nails done!

I'm not from the UK, but I believe that this applies to you:

Did claimants have a choice when they deprived themselves of capital H1832 The DM has to decide why claimants or partners chose to deprive themselves of capital when they did if they had a choice in the matter1 . The fact that claimants had a choice does not mean their purpose was to get UC or more UC. It is a fact which the DM should take into account when deciding the claimant's or partner's purpose.
1 R(SB) 12/91 H1833 Claimants or partners have no choice if they use their capital to pay

1. for the necessities of life, such as food and fuel or
2. debts or
3. the Department to repay an overpayment.

Claimants or partners who had no choice have not deprived themselves of capital to get UC or more UC.

H1834 Claimants or partners have a choice if they

1. give their capital away
2. spend their capital extravagantly or imprudently even if they say they have used it to pay for the necessities of life Note: See H1339 if a person has a certain and immediate liability to repay capital that has been given to them.

You can't certainly pay your standard bills without this being deprivation of assets. This would be a shame though as the money will be gone quickly without any beneficial impact on you. If possible, I would heavily investigate paying your mortgage off as much as possible. This will reduce your bills which may negate the need for UC.

This is not a Government website, but it does seem to suggest that paying off a mortgage is a sensible reduction of debt and therefore not deprivation of assets: https://www.mytaxaccountant.co.uk/post/buy-without-deprivation-dwp-capital

Revolut are offering 5% interest on their savings account at the moment. If you put it in there, that would give you about £300 a month. It is taxable so would amount to about £240 a month. That would help a bit towards bills I’d have thought?

Have you got an ISA? Max that out first- tax free interest.

Yes I do think trying to keep £80k and claim UC is wrong but firstly I can see OP had these separate in her mind, and situations don’t change all at once (divorce etc) and secondly from her updates she seems to understand now. The trouble for OP is that people will keep reading the first post and posting a “knee jerk” comment, when we’ve moved beyond that with some good and sensible advice. I think one of the best was the poster who said “don’t make UC your goal”. I feel for OP with her children’s lifelong care needs and mother’s dementia but she needs to put everything “in the pot” to maximise savings and minimise outgoings. That way she will be true to the meaning of what her mum said - use this money after I’m gone. The money - in some form - will still be there.