While the DWP considers the income and savings of claimants during the means test for benefits claim, there are still certain benefits that may not be affected by an increase in savings such as receiving a lump sum amount of money through inheritance. While the key focus of this blog post remains on the consequences of inheritance on one’s benefits claim, we will also analyse the details of various means and non-means-tested benefits, as well as the role of inheritance in one’s financial circumstances.

What Happens If You Inherit Money While On Benefits?

If you inherit a lump sum amount of money while you are claiming benefits, you must inform the Department for Work and Pensions. An inheritance increases your savings and is counted as a change in circumstances with must be reported to local authorities to re-assess your financial situation.

As a result of this reassessment, there may be changes to your benefits claim. Since your savings are accounted for during a means test for benefits claim, an inheritance can potentially reduce the benefits you currently receive. 

Benefits that are means-tested (this means that the claimants’ income and savings affect their benefits claim) will reduce with an increase in your savings. These include the following:

  • Jobseekers Allowance
  • Income Support
  • Pension Tax
  • Housing Benefit
  • Council Tax Support
  • Universal Credit
  • Working Tax Credits
  • Child Tax Credits

However, since the following benefits are not means-tested, the amount that you claim from them will not be affected by your inheritance:

  • Disability Living Allowance 
  • Personal Independence Payment 
  • Contribution-Based Employment and Support Allowance

While most individuals consider that transfer of savings, selling of one’s property or gifting their home to a family member is a safe way of hiding their inheritance or savings or at least keeping them away from being counted for a means-test, this is considered as deprivation of assets

Additionally, any of the following actions will be counted as deprivation of assets if it takes place within a short period of time prior to one’s claim for benefits:

  • To give away a large sum of money
  • To transfer the title deed of one’s property
  • To spend a large amount of money which is in contrast with the spender’s usual spending pattern
  • To lose money through gambling 
  • To use savings in order to purchase items excluded from a means-test such as a car or 

Can I Hide My Inheritence To Claim Benefits?

There is no guaranteed way to physically hide one’s inheritance to claim benefits without practising redeemable actions such as keeping one’s money in offshore accounts or deliberate transfer of capital. However below is a list of ways through which individuals may be able to save some money, yet be able to claim benefits by keeping them excluded from a means-test:

  • Property is owned by the claimant but occupied by a relative who has reached pension age 
  • Property is owned by the claimant but occupied by a relative who is incapacitated
  • Property has been left unoccupied due to a relationship breakdown (up to 26 weeks)
  • Property is undergoing repairs or renovation (up to 26 weeks)
  • The claimant has received proceeds from selling their house and intends to purchase another property with them.
  • The claimant has received money from insurance claims (up to 6 months)
  • The claimant is awarded capital from damages and injury 
  • The claimant has life insurance policies that haven’t been cashed in
  • The claimant has state benefit arrears or a pension fund that hasn’t been accessed as yet
  • Purchase of personal possessions such as jewellery, furniture or car
  • Purchase of business assets
  • The value of a pre-paid funeral expense
  • Social fund grant payments

What Happens If DWP Finds My Hidden Inheritance?

Should there be evidence found that an individual has deliberately hidden their savings from inheritance by reducing their capital with the aim to claim state benefits, the government will consider it as notional capital. This means that due to the deliberate reduction in capital, despite not being in possession of the owner, the capital items will be included in their means test and considered to be part of the owner’s possessions.

However, should a claimant be found to be in ownership of any of the following capital items, these will be accounted for and considered as savings by the Department for Work and Pensions as they assess the claimant’s eligibility for benefits:

  • Property (not your main residence)
  • Joint savings
  • Income bonds
  • Premium bonds
  • Stocks and shares

Whether these items are owned by an individual or a partner/spouse who lives with them, they will be counted as savings.

Which Benefits Can I Lose By Hiding My Savings?

While it may be tempting for some individuals to hide savings with the aim to claim benefits (or increase their claim), there are dire consequences of being caught as a result of benefit fraud. Jail for £96,000 benefit cheat Helen Ryan, who had £184,000 in savings – BBC News and Pensioner to repay benefits after hiding ‘huge’ savings pot | Haringey Council are two examples of individuals whose claim fraud was caught and they ended up serving a jail term as well payment of a fine and clearance of dues.

Below is a list of benefits that claimants may no longer be able to claim when found guilty of benefit fraud:

  • Carer’s Allowance
  • Employment and Support Allowance
  • Industrial Injuries Reduced Earnings Allowance
  • Industrial Injuries Retirement Allowance
  • Jobseeker’s Allowance
  • Severe Disablement Allowance
  • Widowed Mother’s/Parent’s Allowance
  • Housing Benefit
  • Incapacity Benefit
  • Industrial Death Benefit
  • Industrial Injuries Disablement Benefit
  • Pension Credit
  • Universal Credit
  • Working Tax Credit
  • War Disablement Pension
  • War Widow’s Pension
  • Income Support
  • Industrial Injuries Unemployability Supplement
  • War Pension Unemployability Supplement
  • War Pension Allowance for Lower Standard of Occupation

What Is The Savings Limit To Claim Universal Credit?

To be eligible for Universal Credit, your savings (including capital and investments) must be less than £16,000. The amount of Universal Credit that you may be able to claim depends upon the amount of savings you have which may range anywhere from £6,000 to £16,000. In this case, too, the first £6,000 will be disregarded.

However, if you live with a partner and they have savings amounting to £16,000, these will be counted as your savings.

In addition to savings, the eligibility criteria for Universal Credit also require claimants to be above 18 years of age and under the state pension age, be unemployed or on low income and be a UK national.

Can I Protect Inheritance From Paying Nursing Home Fee?

One of the most common ways that people adopt to protect their inheritance from paying nursing home fees is through asset protection trusts. Although nursing home contributions by those eligible for such care is means-tested, there are many claimants who choose to reduce their assets prior to being transferred to a nursing home to avoid them being sold or used for care home fees payment.

If someone decides to proceed further, they have the below options to choose an asset protection trust from:

  • Protective Property Trust: This applies in the case of joint ownership of property. When one partner dies, their share of the property transfers to the trust and if the other partner moves into care, only their own share will count for the means test and not that of their deceased partner. 
  • Life Interest Trust: In this case, the trust covers the entire property and estate of the person claiming the trust. Based on their will, their property and estate will be passed down to beneficiaries.
  • Interest in Possession Trust: This is similar to the Life Interest Trust; however, under interest in possession, beneficiaries can start claiming income from the time of the trust being enforced.

Conclusion:

Through this article, we have learnt that while your inheritance can reduce your benefits claim on means-tested benefits, however, non-means-tested benefits will remain unaffected. On the other hand, since inheritance is considered as an increase in one’s savings, it accounts for any future means test to be conducted in the claim of benefits, care home fee or even council tax reduction.

FAQs: What Happens If You Inherit Money While On Benefits?

Will I lose my benefits if I inherit money?

You may not completely lose benefits if you inherit money but the amount of your benefits claim may be reduced in the case of means-tested benefits which include the following:

  • Jobseekers Allowance
  • Income Support
  • Pension Tax
  • Housing Benefit
  • Council Tax Support
  • Universal Credit
  • Working Tax Credits
  • Child Tax Credits

However, the amount that you claim from Disability Living Allowance, Personal Independence Payment or Contribution-Based Employment and Support Allowance will not be affected by your inheritance.

Do I have to declare an inheritance to the DWP?

An inheritance increases your savings and is counted as a change in circumstances with must be reported to DWP to re-assess your financial situation. Since your savings are accounted for during a means test for benefits claim, an inheritance can potentially reduce the number of benefits you currently receive. 

Does a gift of money affect your benefits in the UK?

While gift money received voluntarily from friends and family bear no impact on the benefits that someone claims in the UK; however, significant amounts of gifts that increase the savings of recipients in a drastic manner or continue to be received over a period of time, may potentially reduce their benefits claim.

How much money can I have in my bank account before it affects my benefits?

If you have less than £6,000 in your bank account, you will be to receive the maximum amount of benefits against your claim. If your bank account savings amount to £6,000 or above, the amount of your benefits claim will continue to decrease as savings rise. If you have savings equal to or more than £16,000 in your bank account, you will not be able to claim benefits at all. 

Is inheritance classed as income in the UK?

No, your inheritance is not classed as income in the UK. However, should the inheritance money lead to rental payments or shares dividends in the future, such incomes will be considered for tax purposes as they will then serve as income for the recipient.

References;

How do savings and lump-sum payouts affect benefits?

How much savings can I have on benefits? | Raisin UK

Check if a change affects your Income Support – Citizens Advice

How do savings and lump sum payouts affect benefits? | MoneyHelper

Can I protect my home from care fees? | QualitySolicitors