If you inherit some money or property or other assets once a loved one passes away, and you are on benefits, then these benefits may well be affected. It all comes down to what kind of benefits you claim and how much you have in your savings; some won’t be affected at all, but then there could be an impact for others. Throughout this article, we will talk in more detail about how your inheritance could affect the benefits you claim and whether there is anything you can do to avoid such an impact.
Have You Received Inheritance Whilst on Benefits?
The reason why different benefits can be affected by you receiving an inheritance is that many of them are means-tested. This means that once the income or savings you have exceeds a specific threshold, the benefits you receive will either reduce or cease altogether. The different means-tested benefits that will be affected by your inheritance include the following:
- Universal Credit
- Employment and Support Allowance
- Income Support
- Housing Benefits
- Pension Credit
- Working Tax Credit
- Council Tax Support
- Child Tax Credit
If you have received any kind of inheritance, you need to let the Department of Work and Pensions (DWP) know if your savings have increased. If not, there could be serious ramifications, including a fine and a potential prison sentence. On top of that, it could be the case that you cannot claim further benefits for up to 3 years.
What Makes Up Your Savings?
Given that your savings greatly impact whether or not your benefits will be affected by your inheritance, you should calculate your current savings. Savings are classed as money you can get hold of easily or any kind of financial product you could sell quickly. These include the following examples:
- Cash Savings: Fairly self-explanatory; cash savings are any savings in your bank account or building society account. They also include any other type of account that pays you interest.
- Investments: Your investments are a saving product that gives you a return on your money; these include stocks and shares within an ISA or a unit trust.
- Repayments on Your Mortgage: Your mortgage repayment includes any money you pay every month to reduce the amount of your overall mortgage loan, for instance, if you have some kind of flexible mortgage.
- Premium Bonds: Your premium bonds consist of national savings and investment products that pay out various prizes instead of paying interest.
- Rent Payments: This is money you pay monthly to live in somebody else’s property.
- Council Tax Payment: This is the amount of money you pay yearly to help you cover the costs of any council tax payment.
- Other Regular Bills: These vary from person to person, but some of the most common include utility bills, mobile phone contracts and car insurance.
What Are the Savings Limits on Different Benefits?
Different types of benefits have different savings limits attached to them. Means-tested benefits have a lower capital limit of £6000 and an upper limit of £16,000. This limit is commonly referred to as a Savings Credit threshold.
- Universal Credit
If you (or your partner) have less than £6000 in income or savings, then your ability to claim these benefits will not be affected. That being said, if you and your partner have savings that come to more than £16000, you can’t claim Universal Credit at all.
- Housing Benefits
If you have reached the State Pension age, then the £6000 limit doesn’t apply to you unless you also claim housing benefits with somebody under the State Pension age. If you are over the State Pension limit, you can have up to £10,000 in savings before the housing benefit is affected. After that, for every £500 over the limit will count as £1 weekly income. Finally, if you claim pension credit, you can save up to £16,000 before any claim to your benefits is affected.
- Tax Credits
Your tax credits are not affected by your savings as they are based on the amount you have earned in previous years rather than what you are making now.
- Pension Credit
Your overall capital will not affect your Pension Credit unless you have over £10,000 in assets. If you have over £10,000 in assets, then for each £500 you will be considered to have an income of £1 a week. This will be added to other forms of income, which will impact your pension.
What If You Inherit a House Whilst on Benefits?
If you don’t inherit money but instead inherit a property, this isn’t likely going to affect your benefits; however, it’s more likely that you will pay inheritance tax. There are several different ways that you can try to avoid paying inheritance tax, but the fact is that if the value of the estate goes above the nil rate band, inheritance tax will be due.