Inheriting whole holiday home on Universal Credit

NedS

Grumpelstiltskin said:

Get him to check Inheritance Tax in detail, even with the 2 properties he maybe under the limit.

In your situation I think you will have more hassle and less income so not worth it.

The OP would need to make a decision whether it is more beneficial to take the house now and suffer a loss of UC (between now and whenever they may otherwise inherit the property upon death) that may be offset by any saving in inheritance tax.

The value of the property could be disregarded for upto 6 months if you are trying to sell the property, at which point you could use some of the proceeds to pay off your mortgage. Any remaining, over £16,000 would then end any entitlement to UC.

How much is the inheritance tax liability likely to be? How much UC may you lose in the interim? Make your decision accordingly.

mumf

Please forgive my ignorance,and I am ignorant about this : How do the Universal Credit actually ‘know’ you may have inherited a property? When it happens ( or you have £16000 + in your account) ? Does your name show up automatically? 

HillStreetBlues

mumf said:

Please forgive my ignorance,and I am ignorant about this : How do the Universal Credit actually ‘know’ you may have inherited a property? When it happens ( or you have £16000 + in your account) ? Does your name show up automatically? 

You tell them, failure do so could then be classed as fraud.
I expect there will be other ways that it would be found out.

NedS

mumf said:

Please forgive my ignorance,and I am ignorant about this : How do the Universal Credit actually ‘know’ you may have inherited a property? When it happens ( or you have £16000 + in your account) ? Does your name show up automatically? 

It is the claimant's responsibility to declare it. Failure to declare is fraudulent and would be prosecuted when discovered.

DWP have computer matching systems that flag this kind of thing as the estate would be declared to HMRC for probate purposes - there is no hiding from your responsibilities. Further, all land registry records are now computerised so once they become the legal owner of the property, this information can be shared with DWP and will flag up on automated scans if it has not been declared.

Alice_Holt

The prospect of having 2 properties to maintain / equip  whilst living on a P/T salary with little savings seems risky to me.
Particularly if the property is difficult to let and a distance away.

As said the father really needs professional advice on this.

Note that in gifting his second property to you he will be liable to pay capital gains tax if the property is worth more than when he bought it and that increase is beyond the CGT threshold.
If he hasn't any money (as the OP suggests) - then how will he settle his CGT bill? 
 
It may be better for him to sell the property - take the capital gain hit, and then to gift you by reducing your mortgage, Potentially IHT free if he lives 7 years. 

Adviceplease1

Hi everyone, thanks for being kind enough to give up your time with this. All good advice.

It does seem UC would stop and I'd lose the 85% childcare refund and switch to tax credits instead.  If I wait until Sep, one child goes to school and the other gets their age 3 entitlement (30hrs or 24hrs year round). So my childcare costs drop dramatically, Tax Credits cover up to £2K per child and they'd mostly cover this.

In my universal credit journal, they're being weasly saying 

"I have spoken to a decision maker and it is simply not possible to make a decision and give you 
an answer on hypothetical questions. 
The circumstance must take place so the decision maker has all of the accurate information required 
to make a sound decision. There is a large information gather required before a decision is reached and 
that is based solely on the individual claim as not everyone's circumstances are the same." 

But I think that's wrong (they've been wrong before!) and the people on here are right that UC would end. It's not a hypothetical question based on my personal circumstances, it's a fact that if your share in a second property is worth more than £16,000 you don't get Universal Credit, right?!

The Welsh cottage doesn't make any profit, but we really want to keep it because it has high sentimental value (built by my ancestors 7 generations ago). It's in a remote area, I couldn't live there due to lack of work. So I want to keep that, and my current house.

This is it in a nutshell "The OP would need to make a decision whether it is more beneficial to take the house now and suffer a loss of UC (between now and whenever they may otherwise inherit the property upon death) that may be offset by any saving in inheritance tax."

Since my U/C non childcare element is only around £180pm (after P/T wages), and the IHT 'taper relief' would save around £20K if Dad lives another 3 years, it does seem sensible to do the transfer now.  When both kids are at school (Sep 24) I could work F/T and then not be getting UC anyway.

We're consulting with a tax accountant who've referred the matter to their Director because the Capital Gains Tax and Inheritance Tax are so complicated. It's going to be a calculated gamble based on Dad living at least another 5 years (he's in good health but 81). After that, we're seeing a solicitor.  If anyone knows any good ones in the South West, please PM.

Thank you for the very smart and intelligent answers.

poppy12345

You can’t claim tax credits because it no longer exists for new claims. 

calcotti

Adviceplease1 said:

It does seem UC would stop and ..switch to tax credits instead. 

As poppy says that is not possible. Tax Credits we’re replaced by UC and new claims cannot be made. As mentioned in an earlier reply you could see if Tax Free Childcare would be applicable.

https://www.gov.uk/tax-free-childcare

Adviceplease1

Thanks Poppy and Calcotti, yes, it seems I'd be eligible for Tax Free Chilcare, helpful link thank you.

Spoonie_Turtle

Adviceplease1 said:

In my universal credit journal, they're being weasly saying 

"I have spoken to a decision maker and it is simply not possible to make a decision and give you 
an answer on hypothetical questions. 
The circumstance must take place so the decision maker has all of the accurate information required 
to make a sound decision. There is a large information gather required before a decision is reached and 
that is based solely on the individual claim as not everyone's circumstances are the same." 

But I think that's wrong (they've been wrong before!) and the people on here are right that UC would end. It's not a hypothetical question based on my personal circumstances, it's a fact that if your share in a second property is worth more than £16,000 you don't get Universal Credit, right?!

Not necessarily, if there are circumstances in which it can be disregarded then entitlement to UC can continue.

In fairness they are technically correct - the decision has to be made according to the circumstances at the time.  They can't refer it to a decision maker for a legal decision before the change happens, and a DM isn't really in a position to make a hypothetical decision; if nothing else, if something changes and the actual decision is different it could come back to bite them.  [There are probably rules as well that I don't know about.]

UC workers are often wrong, sometimes even about simple things, but in this instance, no - they are really not qualified to give this kind of advice.