Inheritance and benefits

gemma1979

What happens if you are left a house and a sum of money in a will? Obviously I know money over a certain amount reduces/stops benefits but what is the position with a house left outright and a house (life interest only)

rogerblack

The short version.
Capital (for benefits purposes) is anything you own that you can sell, or that you can sell the rights to others.
Certain things, like the house you live in, are ignored.

Is it possible, even through legal action, for you to either sell this house, or for you to sell future rights to it.
The wishes of the deceased may not matter so much if this is legally possible.

For example, if the house would pass into your estate, and could then be sold, the right to that house might have some value.
If this is not the case, then as I understand it, this would be ignored for means tested benefits.

This is a complex area of law, and if someone is proposing to leave you an interest in a house like this, you should get legal advice as to the full benefit position.
This is a specialised law area, you want a solicitor familiar with the capital rules.

http://www.dwp.gov.uk/docs/dmgch29.pdf is the rules for JSA. Most other means-tested benefits are similar, or identical.

antrobus

gemma1979 wrote: »

What happens if you are left a house and a sum of money in a will? Obviously I know money over a certain amount reduces/stops benefits but what is the position with a house left outright and a house (life interest only)

If you're going to live in the house, it makes no difference. If you're not living in the house, then if you own it, it's capital and will be treated as such by DWP. If you're not living in the house, and all you have is a life interest in the house, then all you have is the potential income from renting it out.

gemma1979

I don't know it is my mums house she has just made a will leaving her house (which has been bought outright) to me upon her passing which I intend to then live in but I don't know whether it would be better for her to leave me a life interest then the beneficial interest to pass to my kids (her grandkids) on my passing. Obviously money left would be treated as capital.

rogerblack

gemma1979 wrote: »

I don't know it is my mums house she has just made a will leaving her house (which has been bought outright) to me upon her passing which I intend to then live in but I don't know whether it would be better for her to leave me a life interest then the beneficial interest to pass to my kids (her grandkids) on my passing. Obviously money left would be treated as capital.

A house you live in (or are attempting to sell, or some other things) will usually be entirely ignored, apart from in unusual circumstances.

(if, for example it's held to be reasonable to sell part of the property)

Money in a properly setup trust may also be entirely ignored.

It is quite possible for her to setup a trust in such a form that (to use you as an example) it would pay any utility, grocery bills, a holiday every year, repairs on the home, ...

This could be put in a form that you have no way to access the capital at all, and would not affect your benefits in any way.

(You _CANNOT_ do this once probate is granted - it has to be at her instigation, and you must not be able to successfully apply to the courts to get this varied)

This is quite analogous to the more usual estate planning employed by the rich.

In their case it's minimising exposure to inheritance and other taxes, in this case it's minimising pound-for-pound reduction in benefits, and the effect of the notional capital rules.

My understanding is that the only case in which a life interest in the property may be a good thing would be if you came into some other property, but this is an area where you should really consult a solicitor who knows about both inheritance and benefits.

The question of if this is moral is another question entirely.

Speaking personally, I see extremely little difference between someone who would normally pay tax on their large estate attempting to reduce this bill, and someone who would normally cause someones benefit to be reduced by giving them money attempting to reduce that amount.

mildred1978

rogerblack wrote: »

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The question of if this is moral is another question entirely.

Speaking personally, I see extremely little difference between someone who would normally pay tax on their large estate attempting to reduce this bill, and someone who would normally cause someones benefit to be reduced by giving them money attempting to reduce that amount.

Really? So in your mind it's fine for somebody to maximise benefits and put nothing into the communal pot, but it's not okay for someone who is paying in to limit the anount they pay? Interesting viewpoint (and part of the reason this country is fcuked).

rogerblack

mildred1978 wrote: »

Really? So in your mind it's fine for somebody to maximise benefits and put nothing into the communal pot, but it's not okay for someone who is paying in to limit the anount they pay? Interesting viewpoint (and part of the reason this country is fcuked).

You can make exactly the same argument about tax.
Money is money.
The benefits system is not fair.
It specifically does not look at your record of contributions.
Someone may have paid in for 25 years, and because they have been unable to find work for the last two, be treated almost exactly the same as someone who has never worked.

If I was in the position of leaving a moderate amount of money in my estate to someone who through no fault of their own (I would have extreme hesitation in doing this for someone who does not genuinely want to work), I would bear in mind the benefits consequences.

These include very nasty things, like if the person the benefits are given to does not spend them more-or-less as they were on benefits, they may be treated as still possessing enough of the money to disqualify them.

Face1992

gemma1979 wrote: »

What happens if you are left a house and a sum of money in a will? Obviously I know money over a certain amount reduces/stops benefits but what is the position with a house left outright and a house (life interest only)

The money you get from the dog breeding would pay the household bills I would think.

princessdon

is there a reason you forsee being on benefits for a long time?

gemma1979

Face1992 wrote: »

The money you get from the dog breeding would pay the household bills I would think.

And the relevance to the question is....????

Face1992

gemma1979 wrote: »

And the relevance to the question is....????

You were asking if you got a house left to you would it affect the benefits you get.

It would be great to be in the position of having a mortgage free house and an income from dog breeding and have the warm glow inside knowing you owe nobody anything because you yourself are paying to bring up your kids. No?