Inheritence help

headcoat

Any advice on this would be appreciated, my mum is due to inherit around £70K, she is 69 and on state pension, which I gather is topped up and council tax paid.

She has said she will lose these benefits once she gets the inheritance, does anyone know of a way around this at all?
thanks

dunstonh

Sounds like she is on pension credit. This gets re-assessed periodically and the receipt of £70k would see pension credit and related benefits removed.

Losing the money or hiding it would be fraud. Although there may be some options depending on what she wants to do with the money.

EdInvestor

She could put it in an investment bond which would pay her a tax free income of 5%, but they would take the income into account for her pension credit. She would get around 67 pounds a week in income from the bond, so she would still lose the credit. But the capital would be disregarded.

Quite why you think she should still get benefits when she can afford to pay her own way escapes me.Benefits are for poor people.

EdInvestor

Paul_Varjak wrote: »

I think you will find it is about £67 per week!

Oops , quite right, slip of the keyboard, duly amended.

jem16

EdInvestor wrote: »

She could put it in an investment bond which would pay her a tax free income of 5%, but they would take the income into account for her pension credit. She would get around 67 pounds a week in income from the bond, so she would still lose the credit. But the capital would be disregarded..

I might be wrong on this but I seem to remember dunstonh saying that, although the capital in an investment bond would be disregarded in cases of pension credit, it had to be seen not to be doing it for that reason alone.

In other words if the IB was set up a few years previously and had been recommended for other reasons such as IHT planning or tax planning it would be OK. If done now it would be seen as deprivation of assets in a bid to receive pension credit.

dunstonh

I'm not sure she would get away with an investment bond. Typically you have to use the investment bond before you are in receipt of benefits. Otherwise its going to be a lot harder to prove you didnt do it to get benefits.

Most of the options are going to either involve an increase in income or an increase in capital. Both of which are going to wipe out the pension credit and associated benefits.

It may be worth her spending it on upgrading her lifestyle and environment by making capital purchases like a new car, home improvements. Maybe even enquire about buying a house (ok, that would probably have to be up north in some cheap area )

headcoat

Thank for all the advice.

She is planning on selling her flat because its over a shop and on 2 floors, getting too old for stairs now and getting a bungalow.

I think that will take up some of the cash, I guess she will just have to use the remainder to live off and lose the benefits.

I realise that benefits are for the poor, but the rich find ways around tax etc so why not the people that have struggled all their life only to lose out because they do not have the knowledge of loop holes.

dunstonh

Its my job to utilise such loopholes as you put it. However, utilising loopholes is legal and acceptable. Deprivation of assets is fraud.

There are also some double standards by the Govt. For example, as advisers we are told we have to consider the benefits people would receive on pensions when making pension provisions. i.e. would a small contribution wipe out benefits but not really pay much more?

However, with investments, we are not allowed to recommend that you use an investment bond as its not included in the means test for local authority care or pension credit. You have to have it documented as another reason.

You could argue that there is no difference between telling someone not to use a personal pension as your benefits will be reduced to telling someone to use an investment bond so you still get benefits.