Unexpected Legacy Problem

Delphinium_Blue

Hello All, Can you help with the following financial dilemma? Suppose a person has depended on state benefits for the last several years. They receive Employment & Support Allowance (support group), Disability Living Allowance, Housing Benefit and Council Tax Support. (They are currently unable to work due to a long term health condition. They then receive a completely unexpected legacy in the Will of a relative who dies suddenly.

The problem is that this legacy is in excess of the amount of savings the DWP allows for claimants of ESA and Housing Benefit. This claimant has always been honest and abides by the rules. What is the best thing to do with this legacy amount in a legal way and avoid losing the legacy and having benefits cut? Would be grateful for suggestions, thanks.

masonic

Does "this claimant" wish to continue being honest and abiding by the rules? If so, they should declare the legacy and let DWP decide what to do regarding the benefits.

Archi_Bald

The recipient of the legacy is required by law to declare the legacy to the DWP.

gterr

ESA (unless the person is on Contributions-based ESA and not yet time-limited) is means tested. So are Housing Benefit and Council Tax reduction. DLA is NOT means tested and can continue to be claimed irrespective of other income or capital.


The person needs to inform DWP and their local authority of change of circumstances, and can expect to lose the means tested benefits until the amount of capital dwindles to below the upper limit for claiming means tested benefits again. There is no legal way of 'hiding' the money so that both the legacy and the means tested benefits can be enjoyed - and penalties for failure to declare are high.


The person may well benefit from financial advice regarding the best way to make use of the legacy to cover future needs, e.g. old age. The Money Advice Service may have advisers accessible through the person's local CAB office. Their services are free and they will be able to help with savings, budgeting and benefit issues.

MacMickster

The recipient of the legacy is in the fortunate position of being able to support themselves for a period of time without having to depend upon support by taxpayers through the benefit system.

Happy days all round.

:beer:

xylophone

This claimant has always been honest and abides by the rules.

Then he just carries on in the same way.

Gadfium

The honest and rules-abiding claimant should be delighted that the taxpayer no longer has to support them as much.

grey_gym_sock

presumably the legacy isn't big enough to buy a home outright (i.e. with no mortgage)? because i would think it's acceptable (i.e. not regarded as "deprivation of assets") for a person to use virtually all of their capital to buy a home, which eliminates the need for housing benefit, but allows them to continue to claim other benefits.

otherwise, there's not much choice except to run down the capital until it's low enough to claim means-tested benefits again. though if there are any items of capital expenditure - e.g. equipment that would assist with living with disability - it would be fair to spend something on that, so long as the aim is to improve quality of life, not just to get rid of the money.

Laurensalive

Seek legal advice.

mad_rich

In general, I'm of the view of the rest on here, that the unexpected windfall is an opportunity to give the stretched welfare system a break for a while.

I do have some sympathy, though, that this basically means the windfall may as well never have happened! You will be no better off as a result of it, which is not very appealing.

Would the deceased have given this gift if he or she had known it would effectively give no benefit to the beneficiary?

You could look into a 'deed of variation', where you effectively alter the will to disinherit yourself in favour of someone else. I have no idea whether this is legal or appropriate in this case; take legal advice.

Is that fair or right? I don't know, that's a moral decision for you to make. (If, indeed, it's possible.)

masonic

mad_rich wrote: »

You could look into a 'deed of variation', where you effectively alter the will to disinherit yourself in favour of someone else. I have no idea whether this is legal or appropriate in this case; take legal advice.

I think such drastic action would be ill advised before speaking to the DWP and confirming what the actual effect of the legacy will be. From experience, when a family member was in a similar situation, it was decided that no action needed to be taken because it was possible the excess savings would be spent over the short term and they would review the situation in the future. The OP doesn't mention how much money is involved, so hard to judge if this could apply.

However, I'd think any attempt by the individual to disinherit themselves could constitute deprivation of assets, so legal advice would definitely be needed.