Deprivation Of Capital Housing Benefit
If you live in sheltered or supported housing and are above state-pension age, you may be able to claim Housing benefit (recently replaced with Universal Credit) to pay for your rent. The eligibility criteria also state that claimants must either be unemployed, on a low income or have low savings. However, Housing Benefit will not cover the costs of food, heating, energy or heating costs. If your Housing Benefit does not cover the entire amount of rent, you may consider applying for a Discretionary Housing Payment through your local council.
Does Deprivation Of Capital Affect Housing Benefit?
According to The Deprivation of Capital Rule in Welfare Benefits | Social Welfare Updates | News deprivation of capital will directly lead to the capital being considered as notion capital; which means that capital that was earlier excluded from the means test will not be accounted for. This act reduces (in some cases removes) the benefits claim of individuals against whom the deprivation is proven.
If local councils are able to prove a deliberate reduction in any of the following by individuals claiming benefits, they will be held responsible for the deprivation of capital, making it considered as notion capital.
- Residential premises (other than the one the claimant lives in)
- Capital under the care of someone else
- Payments or instalments of income
- Compensation payments
- Arrears of payment
- Capital not held in the UK
- Business assets
- Company or trusts owned by the claimant
When someone deliberately reduces their capital or transfers it to someone else (usually a family member or close relative) with the aim to be eligible for benefits or increase the amount of benefits that they are able to claim, it is termed as “Deprivation Of Capital”.
While there is no textbook definition of capital when it comes to claiming state benefits, it generally includes one-time payments, savings, investments, property, land and other assets.
To avoid deliberate deprivation of capital due to financial circumstances you can check the official benefits calculator to learn about the state benefits that you may be eligible for depending upon your personal situation.
To explore the topic in-depth, we will try to answer the following questions through this article:
- How Is Capital Taken Into Account For Means-Tested Benefits?
- Is My House Part Of Capital?
- What Counts As Deprivation Of Assets?
- How To Reduce Assets?
- What Benefits Are Means-Tested?
- What Is An Assets And Income Assessment?
- How To Avoid Selling Your Home?
How Is Capital Taken Into Account For Means-Tested Benefits?
The capital of partners/spouses is jointly accounted for financial assessment prior to benefits claim; however, the capital of a dependant child’s is ignored.
Claimants who own capital worth less than £6,000 will not have any benefit claims affected; however, as the amount of capital increases, their benefits claim starts to get affected such that for every £250, an income of £1 is assumed which reduces claimant’s benefits.
In the case of Universal Credit, the amount is £4.35 per £250. As for Pension Credit, the first £10,000 is ignored. Once the amount starts to increase, they will be considered to have a “deemed income” of £1 per £500. There is no upper limit applied in this case.
Once the upper limit of £16,000 is reached, benefits are no longer applicable for such individuals.
Is My House Part Of Capital?
One’s home is considered to be the most important part of capital when budgeting is done by local councils to ascertain the amount to be contributed by the state. While the residential property owned by a claimant is considered as capital, however, in case their house is occupied by any of the following residents while the owner is in a care home facility, the premises may not qualify to be accounted for in a means test:
- spouse/civil partner/unmarried partner
- a close relative over 60 years of age
- a close relative below 16 years of age (legal dependant)
- former spouse or partner if they are a single parent
This is called property disregard.
If the claimant has no savings or capital yet they are a homeowner, the council will consider recovering the expense from the proceeds of the sale of the house. This is called a deferred payment and may be considered when the applicant has a capital of around £23,250 (excluding the value of their house).
What Counts As Deprivation Of Assets?
When someone deliberately reduces their assets to avoid having to pay for care home fees and relying on the state to bear most (or all) of their care home expenditure, it is considered as “Deprivation of Assets”.
Since care home expenditure is means-tested, local councils conduct a financial assessment of individuals claiming care home residency, taking into account all of the savings, capital and incomes of claimants. This helps them decide upon the amount that the care home resident is expected to contribute towards their care and the amount that is due upon the state.
If the claimant is found to have (a) disposed of assets whether through sale or gift to immediate family (b) without being able to prove intention other than avoidance of care home fees, this act will be classified as deprivation of assets.
While most individuals consider that transfer of savings, selling of one’s property or gifting their home to a family member is all that counts as deprivation of assets, that is not all. Any of the following actions will be counted as deprivation of assets if it takes place within a short period of time prior to one’s claim for care home residency:
- To give away a large sum of money
- To transfer the title deed of one’s property
- To spend a large amount of money which is in contrast with the spender’s usual spending pattern
- To lose money through gambling
- To use savings in order to purchase items excluded from a means-test such as a car or jewellery
How To Reduce Assets?
If someone wishes to reduce their assets with the aim to reduce (or completely avoid) paying for their care home fees or to qualify for benefits, they can use any of the following options:
- Care Annuity: This is an insurance policy that helps to pay for long-term care home expenses.
- Deferred payment schemes: These schemes are offered by local authorities to serve as a convenient and flexible means to pay for long-term care home fees.
- Equity release: This includes the release of equity in one’s home to pay for care home fees.
- Rental income: This means to rent out one’s property with the aim to generate sufficient income to pay for care home fees,
Another option is to transfer your assets to a trust rather than an individual. In this case, there will be a group of individuals considered as a trust to whom the property’s ownership is entrusted with. While this is a feasible option in case of having a legal dependant or a minor who may benefit from the act, however, if it is used to simply avoid care home fees, there are many risks attached. It is advisable for claimants to seek professional financial advice prior to any decision regarding their property.
What Benefits Are Means-Tested?
Certain benefits, including Housing Benefit, are means-tested. This means that when the Department for Work and Pensions assesses individual cases, they take into consideration the financial status of the applicant and are also taken into consideration to have a clear picture of their income and capital. Means-tested benefits include the following:
- Housing Benefit
- Pension Credit
- Universal Credit
- Income Support
- Jobseeker’s Allowance
- Employment and Support Allowance
What Is An Assets And Income Assessment?
Assets and income assessment is a means-based test conducted by local councils to calculate the amount of care home fee that a claimant will be able to contribute considering their financial status, as the council will be bearing the remainder of the expenses. For this purpose, the income, savings and capital of the claimant will be taken into account.
State Benefits such as Attendance Allowance and Pension Credit will be counted as income. However, in the case of Disability Allowance, there will be no accountability for the same.
How To Avoid Selling Your Home?
If someone is not willing to sell their house, there is an option of Deferred Payment Agreement according to which the homeowner signs a formal agreement with their local council. The local council agrees to bear the entire care home expense of the claimant until they are ready to sell their house or the property is sold after the death of the claimant.
Sometimes it is advisable for individuals on low income to consider their situation and make a decision whether they will be better off staying home and receiving care (as well as state benefits) or will they be taken care of better in a care home facility. In such cases, they may consider applying for any of the following options:
- Attendance Allowance
- Personal Independence Payments
Attendance Allowance is a tax-free state benefit applicable to those individuals who have surpassed the state pension age and require supervision due to their health condition. It is aimed towards providing a monthly allowance to those individuals who need assistance with meeting the extra costs of a disability or the support of a carer due to old age.
PIP (Personal Independence Payment) is a benefit intended for people aged 16 years and above; aimed to cover the additional daily costs of living with a long-term disability or illness; be it a physical or mental health condition. It is gradually replacing DLA (Disability Living Allowance).
Deliberate deprivation of assets is not only unethical but also unnecessary. One may be able to claim state benefits to support their low-income or low savings without having to get rid of capital.
Should local councils learn about deliberate deprivation of capital, they may be able to recover the property (if there is evidence of it being gifted to a close family member) or simply apply a notion capital, considering that the capital is still owned by the claimant, which will affect their housing benefit.
Therefore, it is best to take the advice of a professional financial advisor either independently or through your local council office to learn about the options one has.
FAQs: Does Deprivation Of Capital Affect Housing Benefit?
Does capital affect housing benefit?
Yes, capital in excess of £16,000 makes one ineligible for any state benefits including Housing Benefit. However, claimants of Income Support, Income-based Job Seekers Allowance, Income Related Employment and Support Allowance, Guaranteed Pension Credit or Universal Credit will continue to receive benefits if they have capital between £6,000 to £16,000.
What is deprivation of capital for housing benefit?
When someone deliberately reduces their capital or transfers it to someone else (usually a family member or close relative) with the aim to be eligible for an increased amount of Housing Benefit, it is termed as “Deprivation Of Capital”.
What is the capital limit for housing benefit?
Claimants with £6,000 in savings are able to claim a full housing benefit; while those with savings between £6,000 and £16,000 may claim a reduced amount. If you have savings amounting to £16,000 or above, you will not be able to claim Housing Benefit at all.
Is buying a house classed as deprivation of capital?
No, buying a house for personal use is not considered a deprivation of capital.
Which benefits are not means-tested?
Personal Independence Allowance and Attendance Allowance are not means-tested. This means that the amount of support you receive through these state benefits is not affected by your income or savings.