If you have recently inherited a property, you may be wondering what happens to your benefits. Receiving an inheritance can be both exciting and daunting, and it’s important to understand the implications it has on your benefits. In this guide, we will walk you through all the steps you need to take and explain how inheritance can affect your benefits and income. The government has some great stuff on its website but it’s not the easiest to digest so don’t worry – we’ll make everything as clear as possible!
Which of my benefits will be affected by an inheritance?
Any benefit that checks in with how much savings you have or how much you earn has the potential to affect your benefit claims.
Such as :
- Child Tax and Working Tax Credit (Tax Credits)
- Council Tax Support
- Housing Benefit
- Income Support
- Income-based Jobseeker’s Allowance (JSA)
- Income-related Employment and Support Allowance (ESA)
- Pension Credit
- Universal Credit
Whilst we’ve split this list many of these will be merged into one system – Universal Credit, some local authorities’ claims like council tax support will be on their own system. These systems are known as means-tested which means you’ll need to check what the qualifiers are which will include savings.
This can be things like how much cash you have, any savings or money you have in a bank or savings account. Stocks, bonds and ISA’s etc. and if you have any property that you do not live in as the main residence.
If you plan to live in an inherited house as your main residence it will not count toward your savings though there are some timings to be aware of if you do plan to move.
Which of my benefits will not be affected by an inheritance?
The following should not be affected as they do not check your financial status, you will still need to be eligible for each which will not normally include non-means-tested. Some of these might be merged with Universal Credit so the lines can get a little blurry on eligibility so make sure you check into each.
- Attendance Allowance
- Carer’s Allowance
- Contribution-based Employment and Support Allowance (CB ESA)
- Contribution-based Style Jobseeker’s Allowance
- Disability Living Allowance
- Personal Independence Payment
What are the savings limits?
The savings limit for most benefits is £6,000. However, there are a few exceptions. For example, the savings limit for Pension Credit is £16,000. If you inherit a property and it pushes your savings above the limit, you may lose some or all of your benefits.
Can I keep my inheritance if it pushes me over the savings limit?
It depends on your specific situation. If you inherit a property and it pushes your savings above the limit, you may need to sell the property or find another way to reduce your savings.
However, you may be able to keep the property if there is someone in your family who can live in it.
You should speak to your benefits advisor to find out more about your specific situation.
– What you need to know before inheriting a property
– How to protect your benefits when you inherit a property
– What happens to your benefits when you inherit a property
– How to manage your finances when you inherit a property
How to manage your finances when you inherit a property
If you have recently inherited a property, it is important to take steps to manage your finances effectively.
Here are a few tips:
1. Review your budget and expenses. It is important to understand how much money you have available to spend each month. This will help you stay within your budget and avoid going into debt.
2. Create a plan for paying off your debts. If you have any debts, create a plan for how you will pay them off. This may require some sacrifices, but it is important to get them paid off as quickly as possible.
3. Set aside money for repairs and maintenance. If the property you inherited needs repairs, set aside money to cover the costs.
This can be a costly expense, so it is important to be prepared for it.
4. Save for taxes and legal fees. When you inherit a property, there may be taxes and legal fees to pay. It is important to save for these expenses so you don’t have to worry about them later on.
5. Talk to a financial advisor. Get proper legal advice. If you are unsure about how to manage your finances after inheriting a property, talk to a financial advisor for help. They can provide advice and support to help you get back on track financially
So, you’ve inherited a property and you are on benefits, what now?
The first thing you’ll want to do is tell Department for Works and Pensions (DWP) you can find out how to do that here. If you fail to inform them of a change in your circumstances (this means inheritance too!) you may need to either:
- Payback owed money
- Get a fine
If you were deliberately and maliciously trying to hide an inheritance you could face:
- Large fine
- Get prosecuted for fraud and receive a criminal record
- Lose the ability to claim benefits
- Possible prison sentence
Disclosing an inheritance to DWP
it is recommended by Citizens Advice to talk to DWP about any changes as soon as possible but to also keep a written record of when and what, this can be emailed but if not you should note how you reported a change which you can submit as evidence in case any actions are brought against you regards to the inheritance and your benefits.
We recommend you also ensure proof that the DWP received any notifications of change so it can be worthwhile to use tracked services for letters, ask for confirmation on emails etc.
It can be a sad time when dealing with the death of a loved one and inheritance so there is a slight grace period but as part of getting your affairs in order, you should consider talking to the DWP as one of the top priorities.
Can I get my benefits back if I sell or give away an inherited property?
You might already own a home and want to sell an inherited property. If you take steps to sell the property however this may be whether it’s selling to a sibling or estate agent or specialists buyer this will mean the property is “disregarded”
A property that you ‘own’ but do not live in will count as capital depending on the value it can affect how much you will receive in benefits. If a property is disregarded it will not count towards benefits, examples of how a property can be disregarded is:
- You have split up with your partner
- You’ve taken steps to sell the property on the market
- Bought it and plan to move in
- You’re looking to occupy if and you’re working on the legal advice for doing so
- Had to move out for essential repairs but you plan to move back in
You will have 6 months of disgraded property if:
- The proceeds of a sale are used to buy a new home you want to live in
- Home insurance payout is received for damage on the property
- A loan is taken out to renovate the property
Money can be disregarded for 6 months too if it is:
- Proceeds of the sale of your home, to be used to buy a new home
- Home Insurance payout received for damage to your home
- Loans were taken out for renovations to your home
If you already have another home you are living in and you sell you’ll likely cross the £16,000 threshold for benefits and no longer be entitled due to the means-tested benefits if you have savings exceed. A lot will depend on what you do with the property e.g. sell, live in it or anything else you plan.
Give away or transfer (legal) ownership of a property that was inherited
Whilst you are within your rights to do so you should be careful that it is not seen as a ‘deliberate deprivation of assets”’ this is when you are giving up assets (savings or even property) in order to avoid them assessed/calculated in your entitlement. If you are found out or deemed that you are deliberately depriving yourself of assets you’ll still have the savings limit calculated as if you still had/owned them (the notional capital) so in short, you cannot reduce your savings/value to keep receiving benefits.
How will my benefits be affected if I live in an inherited property?
if you occupy a property it will be disregarded (not counted) assuming you do not have other properties (totaling asset value above £16,000)
If you do plan to live in the property you should let DWP and any other benefits dept know this should also include the local council if you are receiving housing benefit which is currently separate from universal credit.
If you’re currently renting
If you are renting and you inherit a property but you plan to live in the property you will have six months (sometimes longer) to make arrangements to move. Within this period the inheritance will not affect your means-tested benefit tolerance. Once you move in as long as you stay there it will not be counted. This means you do not need to panic when dealing with grief and inherited property and you should make sure to take your time dealing with everything you need to when moving and probate.
What to do if you are going to sell your current home and move into an inherited property.
An inherited property can be considered disregarded for 6 months if you are planning to move in but are not living in it currently. This will go the same for your current home whilst you are living in it so you’ll have around 6 months to get everything in order, you should have a plan on how you plan to move and as long as you are actively looking to market your main property you should be fine.
If your property has not sold after 6 months it will be counted towards the means-tested benefits, you can get some additional wiggle room on a case-by-case basis but you will need to get in touch with the DWP
When you do sell your old property and proceeds e.g. once mortgage and debts are settled ‘profits’ will be treated as savings and this has a possibility to push your savings above the threshold for benefits so it’s worth calculating this before to see if it will affect you.
Whilst there is a cross-over period of around 6 months you can only have a single disregarded property considered towards any future benefits at one time.
Can you avoid inheritance affecting benefits?
No, you can seek legal advice to setup a will that will help in interfering with an inheritance but this would take time and couldn’t be arranged after the fact of gaining an inheritance.
Q: Do I need to tell the DWP if I’ve inherited a property?
A: Yes, you must inform the DWP about any changes in your circumstances, including inheriting a property. Failure to do so may result in fines or legal action.
Q: How can I make sure my inheritance won’t affect my benefits?
A: You can ensure that your property is disregarded, meaning it will not count towards any means-tested benefits. Taking steps to sell the property or use the proceeds of a sale to buy another home you wish to live in may also help to protect your benefits.
Q: How long do I have before an inherited property will affect my benefits?
A: Generally, you have 6 months for a property to be disregarded. After this period, the value of the property may count towards your means-tested benefits.
It is important to keep in mind that inheriting a property can affect your eligibility and entitlement to benefits. Informing the DWP of any changes or inheritances as soon as possible is essential to ensure your benefits are not affected. Taking steps such as selling a property or using the proceeds of a sale to buy a new home you want to live in can help protect your eligibility for benefits. Always make sure you have proof that the DWP has been informed of any changes and keep records of all transactions. Understanding the impact of inheritance on your benefits is essential to make sure you can maintain your eligibility for them for as long as possible. With careful planning, you can protect both your assets and retain access to the benefits you are entitled to.