what on earth to do with inheritence?

[marymaryquitecontraryusedtobeafairy]

I've been left a house which to sell now would bring me about 80K in the bank.

I'm poor. I bring in about 24K/year, and am in masses of debt. I just survive. I'm a mum and I work and get benefit top ups. I'm council housed in a dire part of the country, the house is in a slightly better area but I don't wish to uproot myself and children from school and home.

What do I do? Can this help me get out of the poverty trap? Do I live off the money? Live in the house and enjoy a secure home but remain in poverty? I can't afford to do the house up but can I possibly buy a very cheap or auction place, do that up and start flipping houses as my main income?

Look I'm not that bright but I've worked hard all my life and it's just not good enough financially. I decided to be a care worker because I enjoy it but the pay alongside the increase in prices has crippled me and there's no way to get out of it so I just trudge on day by day. I'm not miserable nor are my children but I don't want to waste this opportunity.

I don't have money for a financial advisor right now nor time to research so I'm hoping you clever and wealthy lot can help me out a bit with pointing me in the right direction.

Thank you.

mumwon - i'm no tax guru but i think she would probably have to pay income tax on any rental income and possibly capital gains tax if she wasnt living in the house as her main residence and she decided to sell it in a few years (this is on any increase in value from now).

this illustrates why she needs proper advice though and not the batshit comments some people have been making on here.

anyold - having someone living in your house is a very different scenario to walking past someone in the street which is clearly a public place. Personally there is no way i'd have lodgers if i had kids in the house (I've had lodgers pre-kids and its not something i would ever do again unless i was totally desperate)

@marymaryquitecontraryusedtobeafairy

If you buy your current council place you'll need to factor in major works bills as well as your own general repairs. So for instance if you live on an estate and the council plan to replace all the windows or do roofs etc you will be liable for a very hefty bill - even if the work isn't taking place on your house.

You should ask around your neighbours to see if anyone has bought and get some idea of costs from them.

Unless the other house is in really bad condition, it's probably worth it to move and be rent free, even if you're receiving HB at the moment. If your circumstances change as you would like them to you won't qualify for HB in the future anyway.

Best of luck.

How are you getting your full rent paid when you earn 24k? I'm on around 15k and get around £100 month UC!

You don’t want to move into the inherited house because it’ll be a liability and all the extra expenses that come with owning your own home. Then you talk about selling that house to buy the 1 you are in.
It’s a little confusing

Part of debts. The interest you are paying on any borrowed money is BOUND to be much more than any interest you would get by keeping the same amount in savings over the same period of time! Also look into what will affect your benefits/rent allowance etc . Any money you gift to people- even your kids- can be considered by DWP as Depravation of Assets. Definately speak to them.

I would live in the house when you work you won't have to pay rent that should save you almost £500 a month.

Do you have kids @BrokenByDesireToBeHeavenlySent ?

https://www.moneyhelper.org.uk/en/family-and-care/death-and-bereavement/a-guide-to-inheritance-tax

Inheritance Tax (IHT) is a tax on the estate of someone who has died, including all property, possessions and money. The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the tax-free threshold which is currently £325,000.

...If there’s a will, it’s usually the executor of the will who arranges to pay the Inheritance Tax. If there isn’t a will, it’s the administrator of the estate who does this.

IHT can be paid from funds within the estate, or from money raised from the sale of the assets.

----------

The OP won't be responsible for paying any IHT that may be due - that is the job of the executors and only if the estate is valued above the current threshold. Unless the OP's relative had substantial savings, insurance policies or other valuable assets in addition to the property, it's unlikely that her total estate would be large enough to incur IHT.

Again, the OP should ask the executors (whom she does not mention or answer questions about) for a copy of the relative's will.

The whole thing is a bit bizarre with not 1 lodger but 2 now in a 3 bed house that already has an adult and children in, but never mind if no maintenance is done or certificates got, it just needs a lick of paint...

Would buy a property outright is possible ! Or have a small mortgage. All depends on area you live.
Pay off the debts. Later in life (over 55 ) you can if u need the money, take
money out of the property at the mo approx 25%-30% of value and it will be paid off on your death but with INTEREST hence reducing what you can leave to your children.
I would deal with the situation in hand first and if you do not have a private pension put a little aside each month for your retirement as I doubt there will be a State pension in the years ahead.

And licensing if it is a house in multiple occupation. If you get that wrong, it can be a nightmare with potential criminal consequences and you cant just rely on the fact you instructed agents. Really people shouldn't just dabble in being a landlord. You should join an association and make sure you are up to date on requirements OP to avoid any headache.

I'm also not sure how this is the better option because moving in would mean you lose rent element of benefits. Wouldnt you lose benefits anyway if you own and rent out a home? Surely people arent owners of property they rent out for a profit, and which gives them increased equity through those payments, yet still receive benefits?

In your shoes I would probably get rid of the debt because I hate being in debt and feel it's a nightmare creating a hole you can never (it feels) get out of. Then I would use some of the rest on pension as I am terrified of poverty when in a worse state physically than now, and some on personal development to both improve my employability and my own self generally I.e. if I needed counselling etc.

Hi
probably be extremely hard for you to get a mortgage, even with a large deposit

that 20k debt has probably significantly lowered your credit rating - even if you pay it back

also you work part time? That’s not ideal to banks

plus mortgage rates are extremely extremely high atm

best of luck to you

Not what you want to hear but
Depending on how long ago you inherited the house you need to declare the house as an asset to HMRC ( re your benefits )
If you sell you need to declare how much you have as I’m sure you know you’ll loose benefits with savings over £6000.

Even if you sold tomorrow, then gradually paid off debts using that money you must still declare it as it will affect all of your benefits.

Personally I’d live in the house. This will give you security.
If you sell it you’ll loose benefits as you’ll have too much in savings to get any.
You can rent a room to a maximum sum of £7000 ( approx) per year without it affecting you tax.

If you live in the house and rent the other two rooms then you have an increased income.
You must declare this for benefits purposes.
If you sell after renting ( as above ) you must declare the sale to HMRC as you will be liable for capital gains tax as you are renting out a portion of the property. Therefore suggest you keep all improvement costs to offset against the bill for capital gains tax.
Suggest you get a valuation of the property so you can declare this to HMRC in the future should you ever sell.

I think you have to be aware of the benefits issue both in terms owning a second home and the top benefits would stop as that capital would put you over the ceiling cap. Try citizens advice there could be quite a lot of legal ramifications if choose the wrong thing to do

Obviously the first thing you have to do is pay off your debts!

I’ll qualify this by saying I work in finance. Repay the debts first. The interest you are paying is a waste of your money.

Buying and “flipping” property I’d not easy money and no longer tax efficient. You will be taxed on any gains, taxed on any income, and there are fees and charges upfront and back end. You are not in a position to do that.

Apart from repaying debts, don’t make quick decisions and beware of snake oil salespeople.

@marymaryquitecontraryusedtobeafairy Personally I would do everything in my power not to sell a property, especially right now as prices have dropped. Houses are (usually) the one thing that go up in value by doing absolutely naff all. I assume you don’t own your own home? Even if you do I still wouldn’t let go of this other one. Money is in property and once it’s gone it’s very hard to get back on the ladder as deposits get more and more hefty. How much debt do you have? Could you not borrow 10k off the house and pay off some/all debt and they repay the 10k mortgage which i assume you’d be granted on 24k a year?

Oh and ignore most of the “advice” in this thread as it’s awful. People really have little idea about money management.

Definitely pay debts off as a priority as you’ll be paying masses of interest on them, and make an appointment with Citizens Advice financial advisor. They are free and very good and will go through all the tax and UC implications with you, and discuss your options.
You deserve a break and to be in a better financial position!

I would move into the house and see if you can get a mortgage of £20K to pay off your debts. Hopefully the mortgage payment over 25 years will be less than you are paying in rent and if you could manage to overpay the mortgage you could clear it in a few years.

If the house is in a nicer area I would live in it and pay debt off by the using the money you now pay on rent - owning outright is massively financially advantageous and that way you won’t affect your benefits claim.

She isnt paying any interest. She is on a DMP and the interest is currently frozen.

Your care and admin experience is a brilliant grounding for (for example) social work, and what’s more, the life experience of making a few mistakes and picking yourself up again. People who need social work help really appreciate having a social worker who genuinely knows how tough life can be and isn’t judging them. Just an idea!