Gifts & debt

66Mustang

Hopefully a quick 2 questions, not related to me but trying to help someone.

1) I am aware that inherited money can be used to buy a property to live in without triggering deprivation of capital rules for means tested benefits...Is this also the case with money that is acquired from other sources? In this case, I am specifically interested in whether gifted money can be used to purchase a property.

2) I am aware that surplus capital can be used to pay off debt. Is this only official debt whereby some sort of contract is written up? Am I correct in assuming that paying back a family member who informally lent a sum of money, with no contract written up, would not be allowed? 

Thank you.

poppy123456

1/ Yes, you can use gifted money to buy a property that you want to live in and it won't be seen as deprivation of capital. However, if that gift of money is more than £16,000 then entitlement to all means tested benefits will end. There's no disregard given for this while you actually wait to buy the property. A disregard can only apply if you're selling the home you live in and plan to buy another. In this case capital can be disregarded for 6 months, sometimes longer.

2/ Paying off debt will depend what benefits you're claiming.  It's allowed if claiming Universal Credit and not seen as deprivation of capital. However, paying back family members that you informally borrowed money from could be an issue.

3/ For any other benefits such as Income Related ESA/JSA, Income Support, housing benefit and council tax reduction the rules are different. Paying off debt that isn't immediately repayable could be seen as deprivation of capital. It will be down to a decision maker to make the final decision.

66Mustang

Thanks Poppy that answers all my questions and the follow up questions I would have had as well 👍

poppy123456

You're welcome!