Inheritance and benefits

mummy45

My sister is about to inherit £15K from the death of a grand parent and is a now a single mother with a very young baby. She receives tax credits and housing benefit for herself and the little one.

The question is: If she pays the inheritance into her bank account will she lose those benefits until the £15K runs out?

If so is there a 'legal' way to aviod her losing her benefits and keeping this money for her little one in the future? I.e. for example, through a trust with me (or someone else) as an executor?

The cheque will have to made out to her I expect as she is named in the will but there must be a way to aviod her losing her benefits? 15K will only pay her bills for just over a year and then she’d have nothing again.

Thank you.

ToxicWomble

So you want me to fund her living expenses for the next year through my taxes instead ?

elsien

It won't all be taken into account but if there's not a trust set up in the will then giving it away will lead to her being treated as if she still has the money. But if she has no other savings there'll be enough left over that doesn't affect her benefits to put aside for or to use for little uns wellbeing.

https://www.moneyadviceservice.org.uk/en/articles/how-do-savings-and-lump-sum-pay-outs-affect-benefits/amp

Caz3121

if her savings total is over £6k and under £16k her means tested benefits will be reduced (not stop) once she gets to under £6k she would be on full benefit again. note: she may want to keep receipts and notes of her spending in case the decision maker feels she has gone through it too quickly in order to get more benefits. but if she keeps track on what is spent on rent, council tax etc it will add up.

TELLIT01

If she gives the money away she will be treated as still having it. It's called Deprivation of Capital. Unless the will states the money is for the grandchild your sister can put the money into trust now as it will be treated the same way.
Does she receive any other benefits?

melanzana

I am not sure, but would a deed of variation work here, giving sister 6k only, (assuming sister has no other savings), which is below the limit from what I am reading here.

But maybe the beneficiary is treated as taking the full share from day one.

I don't know, but would be interested to find out, if anyone knows.

elsien

I think a deed of variation in these circumstances would still count as deprivation of capital because the reason for the variation would be purely to be able to keep claiming benefits.

calcotti

For housing benefit if her total capital goes over £16,000 she will lose her entitlement to HB. If it is below £16,000 she remains entitled to receive HB but she will be treated as receiving income of £1/week for every £250 or part thereof over £6000. This may result in no payment being due.

Previous comments have overlooked that the rules for tax credits are completely different. Capital is ignored so will not affect her tax credits at all. However when she renews her tax credits she will have to declare any actual income she receives from savings which are not tax exempt (such as money in an ISA). If she puts the money into an ordinary savings account, at today’s rates that isn’t going to produce much interest and will have very little impact on her tax credits.

Please be sure that it is tax credits she is getting rather then Universal Credit. The latter is subject to the same capital rules as I have outlined for HB.

Is she also getting Council Tax Reduction? The capital rules for this vary between different local authorities. Either way she must tell the local authority so that HB and CTR can be recalculated. As described by others attempts to give the money away will not work but can spend it as long as the spending is not unreasonable.

suki1964

ToxicWomble wrote: »

So you want me to fund her living expenses for the next year through my taxes instead ?

As a "newbie" I trust you read the sticky?????

xylophone

Re Deed of Variation.


http://www.dootsons.co.uk/wp-content/uploads/2015/01/Dootsons-Deeds-of-Variation-sr.pdf

Deeds of Variation

A Deed of Variation enables a beneficiary under a Will or a beneficiary who would be entitled to receive a share of the estate on an intestacy ( However, if a beneficiary is receiving means tested benefits, a Deed of Variation cannot be used to redirect his entitlement from the deceased’s estate to prevent benefits being disallowed because under these circumstances it will be seen as a gift from the beneficiary).