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Thread: ESA, Inheritance & Right to Buy

  1. #1
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    ESA, Inheritance, Right to Buy & Deprivation of Capital

    Hello Forum Readers,
    This is quite complicated so I will try to be succinct, although I'm not good at that so apologies in advance..

    I am currently unemployed and in process of making new esa claim, after a brief spell of part-time work which I could not continue due to bullying by a fellow co-worker that drove me near to nervous breakdown. I did take matter to management but to little avail, the stress became too much, & I left. So am in early stages of making new esa claim, have just last week posted claim form ESA50.

    My Father sadly passed away this April, & on Thursday I received a call from my sister who asked if I had opened my post that day, & that I should sit down & open it if not. The letter I opened told me that I am to receive an inheritance from my Father shortly for a sustantially large sum. The news was a total shock, as we had not been too close to him over the years although we would of liked to have been, & we did not expect to receivce anything from him after his death.

    Have been in shock, needless to say, since news, but yesterday started to read some info on internet regarding how this will affect me, & what my options are on how to use it. The more I am reading, the more complicated it appears to be, but I cannot feel any other way than truly blessed to have been given such a gift that is intended no doubt for my best welfare. I feel a pressure to make good use of this blessing from my Father, & not to waste it, to have something concrete to show from it, although this may be problematic because of my situation. My sister is in a different boat, she has no health problems, & works, so she will be more 'free' in how she decides to use it.

    So next week I will obviously inform the benefit agencies about the inheritance, & my benefits will stop. I have been a council tenant for the last 13 years, & have lived in the same 1 bed flat. About a year before my Dad got ill, we had a conversation about my flat, & the fact that having been there so long, I could buy it at a huge discount, this was prompted by a leaflet that came through my door, & we did talk about it. I forgot about it, as was not in a financial position to take it further, but the sum I have received from him is just enough that it would be possible to buy my flat outright with the discount given for length of tenancy under Right to Buy.

    It would be a dream if I were to be able to buy my flat, & my sister has even said she would help with some extra costs of the process of buying if needed to see a legacy from what my Dad has worked hard for years to give us, which is so generous of her. I have been searching for information & am getting very confused about what the rules & regulations are. There seem to be numerous stumbling blocks, the main being the point of 'Deprivation of Capital', from the point of view of being able to claim benefits again in next few years if needed.

    If I were to purchase my flat, it would take all the inheritance money to do, & I would still need to claim esa for as long as it took before finding another job. I would need to start the process of purchase fairly quickly, as the inheritance is enough to buy the flat, and buying costs. It wouldn't be enough to say support me for a year and buy flat. I do want to work again in future, it is finding a job that is difficult, as I'm sure most of you know. Is it too much to hope for that I could do this? Will it be seen as Deprivation of Capital, to invest in the only home I have had for the last 13 years, which would be a security for the next 20 years, going into my old age, (I'm 42)? I'm sure my Dad would have wanted me to use it in such a way, & I think he probably did not realise the legal implications of such a large lump sum for me, I think if he had known I'm sure he would of put it in some sort of trust fund or something. But he didn't. As I said, by no means do I want to sound ungrateful for what is a gift & blessing, but I think it would break my heart if I were not able to buy my flat or else use the money for anything other than basic day to day living for next few years.

    If anyone has experience or info they can share regarding what is considered deprivation of capital, wheather the purchasing of my flat using right to buy would be considered so, it would be appreciated. Plan to visit Citizen's Advice asap, from what I've read it is a very grey area all round. Thanks for reading.
    Last edited by ConfusedDotCom; 10-25-2014 at 06:09 PM.

  2. #2
    Senior Member nukecad's Avatar
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    You are already taking the right step by going to see CAB.

    The lawyers who executed your fathers will may also be able to help, but they may not be used to dealing with benefit matters.

    This question is quite complicated and you will need someone with legal training to give you the correct advice.

    I have been looking at the Decision Makers Guide for ESA and Capital (Volume 9 ch 52) a very long and complicated document, and can offer the following.

    THIS IS MY READING AND SHOULD BE QUALIFIED, I AM NOT A LAWYER.
    Also note that these quotes are only extracts from what is a very long document, I offer them only to give you some idea of the sort of thing the Decision Maker has to consider.

    From what date will your inheritance be counted as my capital?
    The guidance is too long to repoduce here.
    The date depends on wether there was a will or not, wether property was involved, how the exectors admisistered the esate, and so on.

    Would your flat be disregarded as capital if you bought it?
    52387 The dwelling occupied as the home is disregarded indefinitely. Only one dwelling can be disregarded1. However in some circumstances, more than one property can be the dwelling occupied as the home2 (see DMG 52397 et seq).
    1 ESA Reg, Sch 9, para 1; 2 Secretary of State v. Miah; R(JSA) 9/03
    Are you depriving yourself of capital by buying your flat?
    52843 Claimants or partners have not deprived themselves of capital for the purpose of getting benefit or more benefit if they
    1. say exactly what they are going to do with their capital and
    2. are told by the DWP it will not affect the amount of benefit they can get and
    3. do what they said they were going to do with their capital.
    So basically you need to get permission from the DWP to use your inherited capital to buy you flat without it being considered a deprivation of capital.

    The best advice is still to get down to CAB and get their advisors and lawyers on the case.

  3. #3
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    Thankyou nukecad,
    I am emotionally all over the place with this, at least what you say is not a flat no by what is in the reg's. It was literally this last Thursday that myself & my sister heard anything about the inheritance, although it has been six months since my Dad passed away. He did own his house, which his partner (not my Mum) is living in, so we assumed that the house had been left to her & we did not expect anything from his will. She has always kept us at arm's length, & we have not even heard from her since funeral, we were just sad that we had lost our Dad, & that's where are feelings were, not in thinking what, if anything, we might 'gain' from it.
    Thankyou for taking time to reply, there is very little info to be found, & I had no idea about deprivation of capital until I read it on a thread on here, so decided to post my exact situation in hope of shedding some light on it. Isn't it senseless that there seems to be no clear guidance from what I read until you've taken an action, & only then they decide an outcome, but they can't make it clear before you've gone ahead what that outcome will be??! Senseless for anybody that just wants information so they can make a right decision within the given rules....Again I stress don't want to sound like am complaining but it is already a huge rollercoaster of emotions that I could never of imagined it would ever be... Thanks for reply

  4. #4
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    Any lawyer involved in the administration of your father's estate owes their duty to the estate, not to any beneficiary of that estate. Any duty owed to a beneficiary may well be narrow in compass without separate instructions (I'm thinking here particularly of the comments on the extent of liability to third parties in the administration of an estate found in Lord Goff's judgment in White v Jones [1995] 2 AC 207 - not that this is something I suggest you look up). The potential for conflict of interest means that lawyer may well decline separate instructions and suggest you seek independent legal advice.

    If you feel in need of legal help, you would be better off seeing your own independent solicitor. The Law Society's "Find a solicitor" web site allows you to search for solicitors by location and area(s) of expertise. It may well be advantageous for you to find a solicitor who has experience in land law and benefit law, if you can find such a person! One advantage of taking independent legal advice is that you can claim against the solicitor's professional indemnity insurance if you lose out as a result of the solicitor's negligence.


    Intentional deprivation of capital is one concern here, but not the only concern.

    By buying the flat, you become responsible for the maintenance and upkeep of the property, also for any ground rent and service charge that is levied. You will also become responsible for buildings insurance, which you should have and which may well be required by the lease (though it might be included in the service charge). Currently these things will be paid for out of the rent, which is presumably covered largely if not completely by Housing Benefit. You need to find out what these charges will be if you buy the flat and take advice on what help might be available towards these costs from the benefit system - means tested benefits will cover some service charges but may not cover some or all of the charges imposed by the lease you would be buying (I would expect the flat to be sold leasehold, rather than shared freehold, though shared freehold raises its own issues about maintenance liabilities).

    Any budget should also make allowance for the costs of contents insurance.

    It is a concern that you intend to use the entire capital to buy the flat, as you will have no reserves for maintenance. If, for example, you need to overhaul the bathroom in a few years' time, where will you find the money? Even apparently simple problems such as a blocked drain can turn out to be surprisingly costly to fix. If you are intending to buy, you should take professional advice on what surveys are appropriate to get a reasonable idea about possible issues with the flat that will become your responsibility to sort out following purchase.

    By exercising the right to buy, you make it hard to get social housing again if your circumstances change. Indeed, the waiting lists for social housing now mean that people who are unintentionally homeless can be waiting a year or more in temporary accommodation.


    To be clear, I'm not trying to talk you out of buying the flat, which may well be in your best interests - I'm just raising things you need to consider as part of what is a complex decision. Quite apart from legal advice, it might be wise to take independent financial advice, ideally from an advisor who has some understanding of the benefit system (if such a person exists - though I have no idea how you would find one).

    If you take independent financial advice, be cautious about an advisor who sees you for free, as they will be looking for commission and might be recommending the approaches that maximise that commission. Arguably, it is better to pay for advice on the understanding that commission will not be sought in respect of any products you take up.


    The intentional deprivation of capital situation is complex. If DWP will rule in advance that you are not intentionally depriving yourself of the capital by exercising the right to buy, then you are certain where you stand. You will never know whether they are prepared to make an advance ruling unless you ask.

    I think this is a case where you should not hesitate to take legal advice from a solicitor who specialises in benefit law, as they will be able to advise on the current position with exercising the right to buy and intentional deprivation of capital. If you intend to take legal advice, I would not approach DWP for an advance ruling until you have taken that advice. A good solicitor will be able to help you present the case that buying the flat should not be seen as intentional deprivation of capital in the best possible light, based on the current position in the regulations and case law.


    nukecad is right to say that your home is disregarded indefinitely as capital.


    I send my best wishes in what, I am sure, is an emotional roller coaster.


    As with nukecad's post, this comes with a disclaimer. I'm a law undergraduate who is not qualified to offer the sort of advice you should feel comfortable relying on when facing such major decisions. I have no assets and no liability insurance, so there's no assets to enforce a judgment against if you successfully sued me!

    In other words, this post is offered in good faith and in the reasonable belief that the contents are true, but you should not regard its contents as definitive enough to make any final decisions.

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    CAB are useless it should be called Citizens Continually Fooled with Outdated Misadvice Bureau. Invest in a real solicitor who actually knows what they are talking about. There's probably a way you can shield that money overseas and still claim ESA legally. Is that the moral thing to do? Well politicians avoid paying tax, claim expenses, and cheat the system for literally millions. It's probably worth seeking financial advice in the private sector.

  6. #6
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    Quote Originally Posted by s7even View Post
    CAB are useless it should be called Citizens Continually Fooled with Outdated Misadvice Bureau.
    I think that's unfair. CAB do the best they can with a largely volunteer group of advisors. The original poster's enquiry is sufficiently complex to justify taking professional legal advice, but there are many situations where CAB and similar voluntary advice providers are appropriate. With the withdrawal of Legal Aid for all benefits matters other than appeals to the Upper Tribunal and the courts on points of law, many benefit claimants have to rely on voluntary sector advice. Even when Legal Aid for benefits was more widely available, the majority of the money went on paying staff working for organisations such as the CAB.


    Quote Originally Posted by s7even View Post
    Invest in a real solicitor who actually knows what they are talking about. There's probably a way you can shield that money overseas and still claim ESA legally. Is that the moral thing to do? Well politicians avoid paying tax, claim expenses, and cheat the system for literally millions. It's probably worth seeking financial advice in the private sector.
    Any views on the morality or otherwise of the behaviour of some amongst the well off do not affect the legal position. There is no lawful way to move assets offshore to make the capital irrelevant to the UK benefits system, as assets overseas have to be declared for benefits purposes in the same way as assets in the UK. Making an application for benefit or failing to declare a change of circumstances in relation to an existing benefit claim when you are deliberately hiding the existence of overseas assets is fraud, which may well result in a prison sentence with the size of the sum of money the original poster has inherited. Any benefit received unlawfully as a result of fraud leaves the fraudulent claimant likely to be subject to confiscation proceedings under the Proceeds of Crime Act 2002.

    Once probate has been granted in relation to a will, that will becomes a public document. DWP are increasingly cross-checking benefit claims against publicly available records, though there is no way of knowing whether they will check the original poster's father's will at any point.

    Any attempt to move the inheritance offshore may well lead to scrutiny under money laundering regulations.


    The original poster has already been correctly told that the capital value of his house is disregarded for benefit purposes, so exercising the right to buy in relation to his home would lawfully result in a capital disregard for most if not all of the money. The question is whether exercising the right to buy is in his best interests, which is not a simple matter as I explored in my earlier reply.

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    All I'm saying is he shouldn't waste his time at the CCFOMB. It's not unfair, they are incompetent -that's why they are there. Just like the people at the JobCentre hold the people they are supposed to help in contempt the people at CCFOMB will probably be just as useless.

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    You clearly have a very negative view about the CAB, though I have come across poor quality advice and errors from solicitors. Earlier this year, I landed up reworking a case being run by a trainee solicitor for a friend as the trainee solicitor simply did not appear to understand the relevant provisions of the Equality Act 2010 or case management strategy.

    Of course, a solicitor is more likely to provide timely, accurate and reliable advice than a volunteer advisor and is required to carry professional indemnity insurance in respect of negligent advice, but there is still no guarantee that a solicitor's advice is correct and will not result in legal liability of some sort if implemented. In most cases, the CAB or similar voluntary advice is all that is accessible to a benefit claimant, and their advice is typically much better than having no advice whatsoever. The CAB work hard to train and support their front line volunteers.


    It is important to be an informed consumer of advice. In the original poster's situation, facing decisions about a large sum of money with potentially large consequences for his financial well-being, I am in no doubt that independent legal and financial advice is justified. This is not the sort of area where the CAB is likely to have much experience and there are legal restrictions on who can give financial advice. Unless the query about deprivation of capital is made to a CAB that has a paid welfare rights advisor or solicitor, or you happen to deal with a particularly experienced volunteer (some do have formal legal training), it is unlikely they will be able to do any more than alert to the possibility of the intentional deprivation of capital rules being triggered by using the capital to buy a house. As the original poster has access to funds to pay for independent advice, the CAB might conclude that it is not the best use of any paid resources they have to use them to research the answer to this question.



    Apart from deliberate trolling, there appear to be three ways to interpret your 'advice' to offshore the capital - satirical/laconic comment, knowingly encouraging someone to commit fraud (which might amount to a criminal offence) or wistful searching for a possibility that two experienced posters about the benefits system have entirely overlooked. I'm not sure any of these are helpful responses to the original poster's question.

    The most obvious disregard that could be used for this capital is the one the original poster is considering using - the own home disregard. However, this throws up the issue with intentional deprivation of capital that is identified in their original question.

  9. #9
    Senior Member Lighttouch's Avatar
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    Just a few points to add.

    You're right it would have been better if your father had left an inheritance in a Trust Fund as tis would not have affected your means-tested benefits.

    Buying your flat
    The flat will be leasehold not freehold.
    If bought you will still need to pay a service charge to cover regular maintenance e.g. cleaning common areas, gardening, window cleaning and hopefully this might also cover things like a replacement roof and re-tarmacing the parking areas in the premises grounds - check what it covers

    The Council should give you up to 60% discount off the current value of your flat.

    Money spent on buying your flat won't be seen as deprivation of capital as you are saving tax payers money.

    Try talking to turn2us for confirmation and advice.

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    Quote Originally Posted by Lighttouch View Post
    You're right it would have been better if your father had left an inheritance in a Trust Fund as tis would not have affected your means-tested benefits.
    That would depend on the trust deed. Many years ago, the Government adjusted the benefits system to prevent many of the dodges that used to be possible using trusts, so it is now very difficult if not impossible to construct a general purpose trust that would evade both capital and income restrictions imposed by the benefits system.

    One possible way to use a trust to prevent a gift being treated as capital - and I stress I haven't checked this - is a trust that does not pass over beneficial ownership of the asset. For example, a trust that retains ownership of the home and makes it available to a beneficiary for use during their lifetime might not affect benefits, but in that case the beneficiary would never get ownership of the capital. However, if the trust was constructed to sell the flat when it was no longer of use to the beneficiary - for example on admission to a care home - and make grants towards living expenses, it is likely that income or the (admittedly restricted) capital would trigger loss of means tested benefit.

    Simply put, I don't think there's a way to have your cake and eat it using trusts.


    Trusts are part of the final chunk of my law degree, so I'll know more about them in a few months' time.


    Quote Originally Posted by Lighttouch View Post
    Money spent on buying your flat won't be seen as deprivation of capital as you are saving tax payers money.
    I wish it was that simple, but I don't think it is, Public benefit is not determinative of whether there is deprivation of capital.


    Exercising the right to buy and living in the property saves money on Housing Benefit, but results in a loss of a publicly owned asset for a fraction of its replacement cost, let alone its market value. It is therefore debatable which way the public benefit lies, especially as Housing Benefit spent on council housing channels the rent money back into the public purse.

    The biggest problem with right to buy is not the discount, but that councils are not able to use all the money received for replacement housing stock.


    Ultimately, the original poster has a right to buy and is certainly entitled to exercise that right notwithstanding any loss to the public.

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