If you’ve inherited a property, you might be worried about losing the benefits you currently receive. Or you might be considering leaving a property to a relative who is currently receiving benefits and want to have peace of mind that it will not affect their future entitlement.
So can inheriting a property mean that you lose your benefits?
There are two types of benefits: means-tested benefits and non means-tested benefits. If you inherit a property, it is highly likely that it will affect any means-tested benefits you receive. Any non means-tested benefits will not be affected if you inherit a property.
It can be a complex and daunting topic, so we have translated the tricky stuff for you into a handy guide. Hopefully our article will answer all the questions you suddenly find yourself with.
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1. What benefits are not affected by inheritance?
The following “non means-tested” benefits are not affected if you inherit a property as they do not involve an assessment of your finances:
- Disability Living Allowance
- Carer’s Allowance
- Contribution-based Employment and Support Allowance (CB ESA)
- Contribution-based Style Jobseeker’s Allowance
- Attendance Allowance
- Personal Independence Payment
You will qualify for non means-tested benefits if you meet the eligibility criteria, regardless of your savings, income or any property you inherit.
2. What benefits are affected by inheritance?
Inheriting a property can affect the following benefits:
- Universal Credit
- Income-based Jobseeker’s Allowance (JSA)
- Income-related Employment and Support Allowance (ESA)
- Income Support
- Housing Benefit
- Pension Credit
- Council Tax Support
- Child Tax and Working Tax Credit (Tax Credits)
These benefits are what’s known as “means-tested” benefits. Means testing considers the amount of savings you have to work out if you qualify for certain benefits. Savings can be made up of things like:
- Cash and money in the bank
- Stocks, bonds and Individual Savings Accounts (ISAs)
- Property that is not your main home
You can find out what means-tested benefits you are eligible for using Turn2Us’ benefit calculator.
3. What Are the Savings Limits
Inheriting a property is likely to affect your total savings. Your savings are relevant when it comes to means-tested benefits as they are taken into account when working out how much benefit money you’re entitled to.
The savings limits depend on a variety of factors, including the type of benefit you are claiming, whether you live in a care home and your age. We have set out a few of the savings limits below.
3.1 Universal Credit Savings Limit
3.2 Income-based JSA, Income-related ESA and Income Support Savings Limit
The rules for Income-based JSA, Income-related ESA and Income Support differ depending on whether you live in a care home or not.
3.3 Housing Benefit Savings Limit
The savings limit for Housing Benefit is different depending on your age.
If you are over the State Pension age and claim Housing Benefit jointly with someone who is below the State Pension age, the lower savings limit of £6,000 applies.
You can check your State Pension age using the Government’s handy calculator.
4. What do you need to do if you inherit a property while on benefits?
You must inform the Department for Works and Pensions (DWP) (and any other issuing-department) of your change in circumstances if your savings have increased because you have inherited a property or otherwise.
You can find out how to report changes here.
4.1 Do you have to disclose an inheritance to DWP?
You should always disclose an inheritance and report any changes in your circumstances to the DWP and the relevant benefits department as soon as possible.
If you do not let the DWP know about a change in your circumstances, which includes inheriting a property, you could be:
- Paid too much, which you may have to pay back and will be deducted from your future benefits
- May have to pay a £50 penalty
If you deliberately attempt to conceal your inheritance, you’re committing benefit fraud and could be:
- Fined (between £350 and £5,000)
- Prosecuted for benefit fraud and receive a criminal record
- Lose your benefits for up to 3 years
- Given a prison sentence
4.2 When should you disclose an inheritance to DWP?
You should report any changes as soon as possible and, in any event, within one month of the change in circumstances.
Citizens Advice recommends that you keep a written record of when and how you reported the change, so you have this as evidence in case the DWP disagrees that a change has been reported.
If you’re reporting any changes in writing, you should send the letter using tracked delivery, so you can prove that it was sent and when it was received.
5. Will you get your benefits back if you sell or give away your inherited property?
5.1 Selling an inherited property
If you already own a home and decide to sell your inherited property, the inherited property will be “disregarded” for 6 months if you don’t live in it, and you have taken steps to put it on the market to sell.
Once you have sold the property, it is likely that the sale proceeds will take your total savings above the £16,000 threshold. You will therefore no longer be entitled to any means-tested benefits with this savings limit.
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5.2 Giving away or transferring legal ownership of a property
If you give away your inherited property or transfer legal ownership of the property to another person, the Department for Work and Pensions could interpret your actions as a “deliberate deprivation of assets”.
You cannot deliberately reduce your savings to ensure that you continue to receive (or receive more) means-tested benefits.
If your actions are found to amount to deprivation, you’ll be treated as if you still owned the inherited property. This is called “notional capital”.
The value of the inherited property (the notional capital) will be added to the assets and savings you do have for the purpose of calculating your entitlement to any means-tested benefits.
6. Will my benefits be affected if I plan on living in the inherited property?
A property that is occupied as your home is “disregarded” indefinitely.
You will need to make sure that you let the DWP and relevant benefit departments know that you have inherited a property and plan on living there as soon as possible.
6.1 If you are renting and inherit a property
If you have inherited a property and plan on living in it as your home, the property value will not be counted for six months (and longer if it is reasonable). This gives you six months to move out of your rented accommodation without the inheritance affecting your means-tested benefits.
Once you are living in the inherited property, the value will be disregarded indefinitely as it is your main home.
6.2 If you plan on selling you current home to move into the inherited property
The inherited property will be disregarded for 6 months if you do not live in it but plan on moving in.
Your current home will be disregarded for as long as you live in it, as it will be classed as your main home.
If you move into the inherited property as your main home before your old home has sold, your old home will be disregarded for 6 months if you have taken steps to put it on the market.
As a general rule, if your property still hasn’t sold after 6 months then the property will be counted as part of your savings and will affect your eligibility to receive means-tested benefits.
Once your old home has sold, the sale proceeds (once any mortgage payments and other debts have been settled) will be considered as savings. It is likely at this stage that the sale proceeds will push your savings above the threshold, and you will stop being entitled to the means-tested benefits.
Please note that only one dwelling can be disregarded indefinitely as your home at any one time.
7. How to avoid inheritance affecting benefits
Prevention is better than cure when it comes to inheritance affecting your means-tested benefits. If you are considering leaving a property in your will to someone that is currently receiving benefits, we would recommend that you seek proper legal advice.
A solicitor will be able to consider that person’s circumstances and plan the will accordingly to ensure they will not miss out on receiving their benefits as a result of inheriting a property.
Want to explore alternative selling methods that are faster & more certain than an estate agent sale? Our free quiz can help guide you in the right direction:
By Matthew Cooper, Co-Founder of Home Selling Expert