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Universal credit and inheritance?

(38 Posts)
Vickix118 Tue 22-Oct-19 01:34:31

Okay so I really don't want to sound greedy so I'll give some back story...

In January 2018 my father in law was diagnosed with terminal brain cancer thankfully he has outlived his prognosis but we have been told not to expect another 12 -18 months... anyway he recently was paid his life insurance early due to his policy's t&c he was aloud it before he died. He gave my partner 22k to put down as a deposit for a house so we can finally get on the property ladder.

Here is where we've got a bump In the road we're currently on universal credit getting around £500 a month as my wage is very low as I'm on maternity leave getting around £200 a month. But now because we have the "savings" (inheritance) our universal credit has been stopped leaving us £500 short a month. We currently are not in any position to buy as we are due a baby in 12 days and still have a year left on our tenancy as we took out a long one to be financially stable. If we have to take a £6k chunk out of the inheritance for the next year we basically can't afford to buy a house again once you take in to account all the fees etc then we are back at square one also I feel awful that we've been given so much money for a house but we have no choice but to spend it on our bills.

Has anyone had this issue themselves ?
Can we transfer the money back to his parents until we are ready to buy?

I honestly don't know what to do as the only reason we're clamming UC is while I'm on maternity leave to help boost our income and now it's a moot point and we're basically going to loose 6k of my father in laws money just to live. Usually I would be 100% up for using it towards living costs but when your dying father in law gives you a set amount for a house and you have to spend 6k just to live the guilt and stress is killing me as it's all because of me sad

Please be gentle on me I really do not want to sound greedy! I just feel massive amounts of guilt because it's not my inheritance to spend but I feel like I'm the reason it's got to be spent if that makes sense.

Thank you for any reply and well done for reading all of this!

P.s sorry for any grammar errors it's 1:30am confused

cabbageking Tue 22-Oct-19 01:53:36

Questions will be asked about where the money has gone and it would be a deliberate deprivation of assets. That is a deliberate attempt reduce assets to avoid inclusion in a means test.

Vickix118 Tue 22-Oct-19 02:02:08

Oh god I didn't even consider that! Think it's going to be a suck it up situation then! I feel so lucky we've been given this money just wish it was a year later when we would be ready to buy! I may look into our tenancy and see if I can find a loop hole or see if we can pay an early termination fee and buy sooner rather than later. Thank you for your response smile

BellyButton85 Tue 22-Oct-19 02:21:25

I'm actually after some advice from you and I don't have any knowledge on UC or any benefits in fact. I'm on maternity and struggling a little. My DH works full time and I'm receiving about £600 a month instead of my usual pay. Would I be entitled to UC on maternity leave? It sounds a lot but near London and our rent etc it's really quite crippling

Vickix118 Tue 22-Oct-19 02:39:39

I couldn't tell you for sure if you would get any as UC varies from location to location I believe however when I was on maternity leave with my first I was earning around £600 on maternity leave and with my partners wage which i think was roughly £1100 at the time we did get help. It's all done on your wage plus household outgoings. Best advice would be to get on the gov website and just apply as the worst they will say is no. It's a long process but even if it's £50 that's a bill you don't have to think about come the end of the month. Has been an absolute life saver for me.

Pilot12 Tue 22-Oct-19 02:44:28

Unfortunately that's the rules. Benefits are supposed to help people out in an emergency and now you have £22,000 in the bank you have money and so are not in an emergency situation. Also if any part of your UC is towards housing costs you would lose those when you get a mortgage.

Yes you are being greedy, you are no longer poor at the current time. Try cutting back or going back to work earlier. You should have thought about this before accepting the money or asked them to hold it in an account for you until you were ready to receive it. If you give it back now the DWP will see straight through you and still deny you UC.

minesagin37 Tue 22-Oct-19 03:14:32

@BellyButton85 can't you start your own thread instead of hijacking someone else's ?

Vickix118 Tue 22-Oct-19 03:23:12

We weren't even told about the money it just turned up in the account as a surprise with the intention to go buy a house with it. We have no intentions to buy currently as financially we wanted to wait for me to be back in full time work as it will bennefit us with being able to get a better mortgage and being financially more stable and not needing UC . I don't want to miss out on a years maternity with my child because of a decision that was made out of our control. We didn't ask for the money but now regardless if we send it back it looks bad and like we're trying to get more benefits. We are no way classed as rich as this money was to buy a home with once we pay a deposit if we are to do that now we'd be worse off than before.

Chivers53 Tue 22-Oct-19 03:55:53

I can see why you feel upset, but it's fair really. Whether the money was earmarked for a house or not, you have £22k sat in the bank. Assuming you do spend £6k on maternity leave, 16 is still a fantastic leg up onto the property ladder.

AJPTaylor Tue 22-Oct-19 04:34:34

How long have you had the money?

SheilaBruce Tue 22-Oct-19 04:39:20

Vickix flowers for your stress. You need to get proper advice about this. Have you considered that you may also be liable to pay tax on the gift (I believe that gifts are only tax free if the person giving them lives a further 7 years)?

PeachMoon Tue 22-Oct-19 05:01:21

Do you also realise that if your father in law passes away in the next three years that you will have to pay 40% of that sum in tax? That’s almost £9000.

The tax amount decreases gradually if he passes away between 3 & 7 years of gifting the money, and then after 7 years it would be tax free.

It seems like this was done without legal or financial advice and perhaps no understanding of the law regarding inheritance tax & benefits thresholds. Sorry I don’t have any advice, I’m not sure there’s very much that can be done about it now that’s its done but I hope things work out for you eventually. And congratulations on your soon to be newborn!

PeachMoon Tue 22-Oct-19 05:02:09

Www.gov.uk/inheritance-tax/gifts

MustardScreams Tue 22-Oct-19 05:12:39

Yes was going to say did anyone get any financial advice before doing this? Because you’re going to be hit with a huge tax bill when your FIL passes.

Amethystlila Tue 22-Oct-19 05:19:30

Do you also realise that if your father in law passes away in the next three years that you will have to pay 40% of that sum in tax? That’s almost £9000.

The tax amount decreases gradually if he passes away between 3 & 7 years of gifting the money, and then after 7 years it would be tax free.

That's fucking stupid but most inheritence lass seem to be.

Amethystlila Tue 22-Oct-19 05:21:18

People you give gifts to will be charged Inheritance Tax if you give away more than £325,000 in the 7 years before your death.

I just don't get how that's fair at all.

BigSexyCrimeUnit Tue 22-Oct-19 05:22:47

That’s not necessarily true. Only if FIL’s estate assets are higher than the inheritance tax threshold.

Talia99 Tue 22-Oct-19 05:28:21

It isn’t the recipient who pays tax, it’s the FIL’s estate and only if it’s over the inheritance tax threshold.

Amethystlila Tue 22-Oct-19 05:31:50

That was a quote from Gov website

Amethystlila Tue 22-Oct-19 05:33:04

It isn’t the recipient who pays tax, it’s the FIL’s estate

Yeah, meaning recipient receives less money than intended, when most of the money the father earned would have been taxed in the first place

Ang69 Tue 22-Oct-19 05:38:14

*Do you also realise that if your father in law passes away in the next three years that you will have to pay 40% of that sum in tax? That’s almost £9000.^

The tax amount decreases gradually if he passes away between 3 & 7 years of gifting the money, and then after 7 years it would be tax free.

This would only be correct if your FIL had already gifted above £325,000 within the past 7 years, i.e., he has already used up his full Nil Rate Band.

Ang69 Tue 22-Oct-19 05:38:51

Bold fail !

PeachMoon Tue 22-Oct-19 05:45:17

Apologies, my misunderstanding, if his estate is less than £325,000 then it seems the tax won’t be the issue then!

Beautiful3 Tue 22-Oct-19 06:10:32

I would transfer it back until you're ready for it? They could use the money to send directly to the solicitor when it's time to buy a place.

DonKeyshot Tue 22-Oct-19 06:18:07

I'm so sorry that your fil's condition is terminal and it's a great shame that this sum of money was not held for your partner until such time as you were ready to buy or bequeathed to him in a will.

However, DON'T PANIC as you will see from the government's website (see link on PeachMoon's post) and the example contained therein it's not necessarily the case that your partner will be liable for inheritance tax unless his df's estate exceeds £325,000 in which case gifts of more than £3,000 to any one person in any one year for the 7 years prior to the date of death can be regarded as part of this sum with the remainder of the estate being taxed at 40% providing his widow (your partner's dm) is willing to agree to this arrangement.

It's also the case that after 3 years of the gift being made the rate of 40% reduces to 32% and continues to reduce until 6-7 years after the gift is made when the rate of tax is 8%, from which it can seen it is more advantageous for gifts that attract a lower tax rate than 40% to be excluded from the £325,000 exemption and the relevant rate paid from the remainder of the estate.

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