How can parents leave funds for their child to purchase a property, without it affecting that child's state income? (disability allowance)

[ManagingFinance]

Asking for a friend.

The situation is this.

Grown adult son is on disability allowance from the state for a chronic illness leaving him largely incapacitated. Physically mobile, but unable to hold down a job.

The adult son is living in a property purchased by his parents, but in an unfavourable neighbourhood, and definitely not one conducive to it ever being a permanent home. Much more suitable to something like a temporary rental. Which as I understand it was only ever intended to be, but as far as I'm aware his condition is deteriorating, not improving.

His parents are encouraging him to ultimately sell the place he's in now and buy a better place, but because of the housing shortage there's not much available, and of that available, it's overpriced.

So what they want to do is leave him money he can use, in addition to the proceeds from the sale of his current residence, to buy a long term home at some point in the future.
What they don't want to do however, is give the money to him outright as that amount of money becomes assessable, meaning his weekly state income would be impact, or ultimately discontinued, at least temporarily until he actually spends that large sum in his possession to buy a property.

The money his parents would give him, would likely come from the sale of their own PPR after their passing.

So the question is, how can that situation be organised, so that he can receive the money to buy a property from his parents, without having his income interrupted?

Any funds at his disposal are assessable up to 50 thousand, so perhaps something in the way of a discretionary trust?

Though I'm unsure how those work?

 

[ClubMan]

What they don't want to do however, is give the money to him outright as that amount of money becomes assessable, meaning his weekly state income would be impact, or ultimately discontinued, at least temporarily until he actually spends that large sum in his possession to buy a property.

What "state income" is he on?

 

[ManagingFinance]

What "state income" is he on?

Disability allowance.

 

[Brendan Burgess]

When both his parents die, he will receive a lump of money.

If he uses it to buy a home to live in, then the home will not be assessed as means for any benefit he gets.

I suppose that if he receives €300k and it takes 6 months to sell his home and buy a new one, they might stop it temporarily. But so what? It is not material in the context of a €300k inheritance.

As both parents are alive, they should not be worrying about this now.

But from the taxpayers' point of view, someone who has a lot of money should not be supported by the state. The State should only be supporting those who don't have the means to support themselves.

 

[faketales]

As both parents are alive, they should not be worrying about this now.

Doesn’t seem unreasonable to worry about their child in this circumstance.

 

[ClubMan]

Doesn’t seem unreasonable to worry about their child in this circumstance.

No point in worrying when they can deal with this by having an appropriate will.

So what they want to do is leave him money he can use, in addition to the proceeds from the sale of his current residence, to buy a long term home at some point in the future.

When both his parents die, he will receive a lump of money.

 

[Brendan Burgess]

his condition is deteriorating, not improving.

The money his parents would give him, would likely come from the sale of their own PPR after their passing.

There are just too many uncertainties to do anything about it now for what might happen when the parents both die. They may well survive him.

If both parents are elderly or in bad health, they should make a will leaving their estate to the child. Keep it simple. He will use the proceeds to buy a new house. So what if he loses his allowance for some weeks or months? It's not material in the overall context of two homes.

And if he ends up with a big cash surplus, then the means test is appropriate and he should not be getting state support while he is wealthy.

 

[Brendan Burgess]

Another option to consider is to trade up now.

The parents could take out a Life Loan on their own home and use the proceeds to help him trade up now.

Brendan

 

[ManagingFinance]

When both his parents die, he will receive a lump of money.

I'm of the understanding, his parents have excluded him from being in receipt of financial proceeds in the will, specifically so his weekly financial supports will not be impacted.

i.e. when their PPR is sold, he won't get anything, as they don't want him to have a large assessable cash surplus that would impact his weekly payments.

Sale proceeds will go to his siblings.

I believe he will receive the property he is currently living in by way of a will, as it being his PPR, it's not assessable.

The suggestion being, they could actually include him in their will, and he could in a short time frame, sell his own property, and use the proceeds from it + the cash he received in the will, to quickly upgrade his current residence to somewhere that's considered long term habitable.

The risk there being, for a period of time until he has found another residence, state supports would be discontinued.

The question in that instance being, is that the optimal strategy in this situation?

 

[Brendan Burgess]

I believe he will receive the property he is currently living in by way of a will, as it being his PPR, it's not assessable.

His parents are encouraging him to ultimately sell the place he's in now and buy a better place

This is the problem in asking questions on behalf of a friend.

On one post, he own the property he is living in. In a later post, he will be getting it in a will.

The whole thing makes no sense. Cutting someone out of a will, oh no, he is in the will, so that they don't lose their state benefits.

The the friend to post the full details here so they can be questioned directly.

 

[ManagingFinance]

Okay I've clarified some of the details.

He's renting the place from his parents (with state support). They wanted to transfer the title to him but chose instead to will it to him to avoid paying CGT.

I think that's where the confusion arose.

And yes the latter part was correct, his parents intentionally chose to avoid his receipt of any substantial cash amount in the will so his weekly payments would not be impacted (or lost).

This individual is significantly developmentally challenged, unlikely to put in an appearance here.

I'm just curious how this situation could pan out on their behalf.

 

[ClubMan]

This individual is significantly developmentally challenged, unlikely to put in an appearance here.

I'm sure that @Brendan Burgess meant the parents and not the son here:

The the friend to post the full details here so they can be questioned directly.

After all, it's they rather than he who is trying to make plans here.

These "second hand" queries often end up too confusing and difficult to deal with efficiently as seems to be the case here.

Asking for a friend.

 

[Sarenco]

Would it make sense to settle the property and a cash amount in trust for the benefit of the son in their respective wills?

Probably one to talk through with their solicitor - very difficult to advise at this remove.

 

[ManagingFinance]

I think the honest truth is his parents can't type or use a computer well, they're country folk.

But I'm getting a picture of how things could play out.

If he received a large cash sum by way of a will, then used that, in conjunction with the proceeds of the sale of the property he's living in (which he would at that point own outright by way of the will), but all that took 6 months.

Is it a case of, for that time period: discontinue receiving state benefits, then assume they could simply be recommenced once a property has been purchased? (I don't know the ins and outs of getting on/off state benefits, especially something like disability allowance)

Or simply as he knows the funds are going to a property and not acting as a liquid asset, as he'll only be in short term possession of them, not declaring them, buy the property, then continue on?

Would it make sense to settle the property and a cash amount in trust for the benefit of the son in their respective wills?

I had queried the situation with A-I and something like a trust was suggested also.

A discretionary trust?

But it must be legitimately outside of his control, or it becomes assessable.

How would that be setup and is it commonly done, or considered a reliable method to manage situations such as this?

 

[ManagingFinance]

On the mention of simply buying another property now, a life loan on his parents PPR.

Could his parents not just buy another (better) property for him when they're still alive?

But as they don't have that extent of liquid assets to hand, they'd have to take out a second mortgage on their own PPR, which gets repaid from their estate after their own passing?

 

[ClubMan]

they'd have to take out a second mortgage on their own PPR,

You mean that their home is currently mortgaged?
Yet more key information being drip fed?
If they currently have a mortgage on their home then they won't be able to get another one - e.g. a life loan - on it at the same time.

 

[ManagingFinance]

You mean that their home is currently mortgaged?

No what I meant was, at one point in time their PPR was mortgaged and of course now it's paid off.

So if they took another, it would be the only mortgage they'd have.

Would that be viable?

Is a mortgage the equivalent of a life loan?

Problem with a life loan is the interest can accumulate quite quickly.

 

[Steven Barrett]

Put the assets in trust for him, so he doesn't own any assets, they are there for his benefit.

@Brendan Burgess does raise a valid point though regarding the disability benefits. They are a social safety net for those who don't have any financial means themselves, not for those who have inherited significant assets and have become extremely wealthy.

 

[ClubMan]

Is a mortgage the equivalent of a life loan?

A life loan IS a mortgage.

Key Post - My experience of a Life Loan

Brendan asked me to do a post documenting my experience from start to finish which would be very helpful to others. 1) What was the financial issue you were facing? My mortgage balance was due and was with Pepper (Ex BOSI mortgage), my rate had increased significantly. I could manage the...

www.askaboutmoney.com

 

[ManagingFinance]

Put the assets in trust for him, so he doesn't own any assets, they are there for his benefit.

This is a prominent piece of advice.

Can anyone explain the particulars of how this works?

How the trust process works? How are they accessed, while at the same time not being assessable?

@Brendan Burgess does raise a valid point though regarding the disability benefits. They are a social safety net for those who don't have any financial means themselves, not for those who have inherited significant assets and have become extremely wealthy.

I completely agree with this.

If there was significant financial means at anyone's disposal, they should not be in receipt of of state support in addition to that.

My understanding of this situation is that it is exclusively to ensure the individual in question has viable living circumstances into the future.

He was renting privately up until recently when the new legislation was announced, and his former residence was sold. His parents who own an investment property as part of their pension gave him right of residence there, with the intention to sign title to him.
But examining CAT decided it may be favourable to will it to him instead.

So in short this individual lives week to week off his state provided income, with little to no additional funds at his disposal.

This current proposition is exclusively to provide sustainable living arrangements, and he doesn't have to live in old rotted out student accommodation, among students, while he is not, and is almost double the age of all his neighbours (and that's just at the moment. If he's living there indefinitely, that situation becomes worse and progressively more untenable).