Inheriting and how it could affect you.
Inheriting and how it could affect your benefits.
The question is often asked, “will an inheritance affect my benefits” The answer is in all probability yes! Receiving an inheritance may well result in the loss of an individual’s entitlement to benefits.
Most benefits are means tested. This means that once income and savings exceed a certain threshold benefits reduce and eventually cease. The thresholds are quite low. For example an inheritance of over £16,000 could invalidate a claim or significantly reduce the amount of benefit received. In effect an inheritance becomes a substitute for benefits.
Where an inheritance is received it must be reported to DWP once it hits the beneficiary’s bank account. Until then, the money is deemed not to be theirs and DWP does not want to know.
A question often arises: “Is there any way of hiding an inheritance?” It is not advisable to try and hide anything from the DWP. This is technically fraud and is illegal.
If you’ve committed or attempted fraud, the penalties for benefit fraud include loss of benefits for up to 3 years and repayment of overpaid benefits. In addition, you may be taken to court or asked to pay a penalty (between £350 and £5,000) and receive a criminal record and possible prison sentence.
Inheriting and its impact on your divorce process.
If you have received or are due to receive an inheritance and are in the process of divorcing there is the question as to whether your inheritance will be included in the pot of matrimonial assets to be divided.
As a general rule in divorce settlements in England and Wales all assets of the marriage are pooled and treated as joint assets. On the basis the inheritance was received before the marriage, an ex-spouse may be entitled to a share of it if they had received the benefit of the inheritance throughout the course of the marriage.
If inheritance is received after the breakdown of the marriage it is more likely that the Court will exclude it from the matrimonial pot. Similarly, a future inheritance is also usually excluded unless the expected inheritance is so large that it would make a substantial difference to the Financial Settlement.
It is important not to try and hide an inheritance. Both parties have a duty to provide full and frank disclosure to the Court and to each other in repsect of the financial remedy proceedings. This is where the court looks to determine how fairly to distribute assets between former spouses or civil partners. This will include examining bank statements, pension values, property and other assets and, of course, any inheritance.
Inheriting and and declaring bankruptcy.
The question is often asked, “What will happen to my inheritance if I have been made bankrupt or have entered into an IVA.”
To answer this question, it is important to understand at what point you become entitled to an inheritance. Legally an inheritance becomes part of your assets the day the person passed away.
Therefore, if you inherit before you were declared bankrupt or enter into an IVA (Individual Voluntary Arrangement) the inheritance is your asset and will be taken into account by the Official Receiver or insolvency practitioner.
If you inherit after bankruptcy but before discharge or completing payments under the IVA arrangement, the money inherited is “an after-acquired asset”. In this case the Official Receiver or insolvency practitioner should be notified. In both cases the inheritance will be used to pay creditors.
You should not try to hide the fact that you will receive an inheritance. The solicitor dealing with the deceased’s estate is legally obliged to inform the Official Receiver or your Insolvency Practitioner.