Ring-Fence Money for Education

I seem to remember hearing that means testers have discretion to ignore disposals that were clearly intended to evade means testing. I suspect now is not the time to create such a trust.

Crossposted to uk.gov.social-security

I think the goverments view will be that you should not need to subdidise your kids through uni. - it is discretionary spending. In the event of running out of money, you should be using the savings yourself prior to claiming benefits.

I don't think it will work, but I think that the best you'll get is a trust with a clear and limited authority, and for good measure called something like "Billy's University Trust"

Placing monies into a "trust" can be construed as deprivation of capital. There are certain rules about trusts and I'd be surprised if this was possible in this circumstance. A trust has certain legal principles that govern the creation of, and management of, a trust.

The rules on means tested benefits revolve around "capital", a wide ranging concept which includes monies both available to yourself on an immediate basis (money in the bank, for example) as well as monies held out of immediate reach (eg ISA's). It also can include monies placed out of reach for the forseeable future.

That said, the underlying principle of means tested benefits rules regarding "capital" is one of "deprivation" of resources. If the intention was not to deprive yourself of capital in order to become entitlement to, or increase entitlement to, means tested benefits then it should not be treated as deprivation. Trying to convince the benefit authorities of this is, of course, a different matter.

Depends upon when the capital was placed in trust and when the benefits where claimed.

If they were placed in trust before the claim and at a time when you could not reasonably know, or at least the DM cannot presume that you might, then there is no deprivation.

OTOH if you put it in trust today and claim in a months time questions will be asked.

Mike

Both, in principle, carry the same questions and need for the same answer.

As you say though, a claim immediately after the event may involve a test of means, the other won't be picked up due to the passage of time... though that depends on whether the OP was to place £10k (for example) in a "trust" fund now and then claim benefits or was to wait a year to claim those same benefits. The latter may not be picked up.

Deprivation requires the DM to demonstrate that the customer disposed of capital in order to gain additional benefits. Unless the customer could have known a claim was probable then there is no possibility of proving deprivation.

Unless the OP has been warned of redundancy then proving deprivation would be impossible.

Mike

In theory, perhaps. In practice, no. The DM would go for deprivation unless the contrary could be proven.

Then the DM's decision is clearly flawed and would get rolled over at appeal or before.

Mike

In this specific case, the aim is to evade a perceived significant risk of means testings, although proving that the person making the claim was the person asking the question here might not be cost effective.

Not declaring the savings in the mattress would definitely be fraud, without a valid trust.

Not everyone with a wrong decision appeals. I'm not sure that it couldn't be seen as deprivation. Chancy though relying on a DM to decide one way or another without a clear cut decision being expected.

Martin <

The savings in the mattress idea at least eliminates any official record of monies, hard to prove someone has the money if cannot trace the savings.

Martin <

That is deprivation, though whether the customer get caught out or not would depend upon the time lag between setting up the trust and the claim plus of course what was said.

Do you suspect that those of us here who work for the DWP will try and hut you down lol!

Really? You have any evidence for this assertion?

As Mike says, in the unlikely event that the DM were ever to know that capital had been diverted elsewhere, s/he has to prove that "a significant operative purpose" of the voluntary deprivation was the obtaining or increasing of benefit. There is no question of the person putting the money aside having to prove the contrary. This is settled law - the onus is clearly on the DM.

As a result of this discussion of course, any capital which is now diverted is done in the light of the necessary knowledge about how means-testing works and how doing it in this way would get round those rules, and so is voluntary deprivation. A wonderfully circular route!

On a more practical note, the income and capital of children is now wholly outside means-testing, so there is no need even to set up a trust. A savings bank account, or other investment, understood to be to go towards education, should be a perfectly safe move - as long as you never admit someone told you to do this, of course...

Clive

I've heard of - and seen - it happen a number of times. The claimant spends a large sum of money, claims means tested benefits and then has either no real explanation of where the money had gone or it's clear that the money has been disposed of in the knowledge that in doing so a claim to benefit would be made.

Well as I said the burden of proof is on the DM, not the claimant. To proceed otherwise would be wrong, although it may well have happened or still happen. See e.g. the Decision Makers Guide at paras 29825 -

Well if someone appears to be being deliberately vague about the issue that might indicate that they were aware that there was a capital limit. So in looking at this the DM may well be seeking to discharge the onus on him, which I say he needs to do and you seem to be saying he doesn't.

Well that is the issue that the DM does have to prove. So in looking at this the DM is seeking to discharge the onus on him, which I say he needs to do and you seem to be saying he doesn't. Neither of the points you make justifies you saying, or implying, that wherever there may have been capital in the past a DM will declare that to be deprivation unless the claimant can prove to the contrary. Or indeed:

Clive

As far as income tax is concerned, if a parents puts money into a child's account then any interest (over 100 IIRC) is taxed as the parent's income not the childs.

Are you saying the means-testing rules operate differently and will regard the interest (and capital) as the child's rather than the parent's?

Based on my extensive and extremely accurate knowledge, children do not pay tax on savings. The parent OTOH will have paid tax prior to investing it.

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True, don't pay tax on savings. The children will however pay relevant taxes when spending the savings. VAT is going up soon unless something else is announced about it in the pre budget budget.

Martin <

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and the rise in VAT is going to cause a little bit of chaos as it's due to take effect in the run up to Christmas - retailers have been trying to get the rise put back to January 2 but with no success.

When VAT was reduced stores responded initially by reducing the VAT through the till rather than having to change shelf prices in one fell swoop. The reverse of this would not be so welcome, so they argue...