inheritance and money

[Member869894]

My mother plans on leaving approx. £50 k each to her 4 children. My brother is on sickness benefits and has been for years. Will an inheritance affect his benefits and if so is there a legal way to avoid it?

1. Yes
2. no

Well leaving her inheritance to her three working children would be perfectly legal

No, the benefits would need to be declared as classed as an asset. Any "savings" over £16k will dramatically affect benefit claims and universal credit. If someone has £50k in the bank, they won't be seen to require the same amount of benefits (possibly none at all) to live an adequate standard of living.

Why would someone with £50,000 in the bank require benefits? Surely you realise that people with £50k stashed away aren't the people that benefits are designed to help.

Which country?

When you say 'sickness benefits', which ones?

PIP and WTC disability elements are not means tested.

I believe ESA is, and UC definitely is.

In England. ^^

Receiving that amount of money directly would cause him to lose all of his means-tested benefits (for example, UC, income-related ESA, housing benefit, council tax reduction). He would be able to reapply for them when the balance falls below £16,000, and have them fully reinstated when below £6,000 (assuming he still meets other criteria).

Your mum could leave his share in a trust, to be managed by trustees. He wouldn't actually be considered to be in possession of the money so his benefits would be unaffected. This needs to be written into the will; it can't be changed after your mother has died. Look at the gov.uk page, on trusts for vulnerable people in particular. She should talk to a solicitor.

Good advice from @flourella.

Leaving a vulnerable person £50k can do more harm that good in the long run, if their small fixed income, rent and stable tenancy disappears down the toilet after just a couple of years, with no back-up plan.

Well leaving her inheritance to her three working children would be perfectly legal

And leaving her inheritance to her non working child is perfectly legal too. Did someone tell you it wasn't?

Thanks Flourella. That sounds sensible

Yes, and quite rightly

And putting it in a trust so he can still claim means tested benefits is also morally wrong

Chloemol I disagree. It's no worse than taking advice from an accountant as how best to minimise tax liability

I learned about trusts after I received an inheritance for a similar amount, and had a large part of my benefits income stopped as a result. I'm currently spending my way through it, on rent and other living costs, and fully accept that this is reasonable (though it was a little galling at the time to realise that my siblings could use their windfall to positively impact their lives, while I would see no measurable impact from mine. And yes I know that perhaps I should feel good about "standing on my own two feet" for a while, but I don't really to be honest).

Trusts for vulnerable people exist for good reason and I would have qualified to be a beneficiary of one such; the morals of it have to be considered of course, but people should know all their options.

@Chloemol

Yes, and quite rightly

And putting it in a trust so he can still claim means tested benefits is also morally wrong

Leaving vulnerable people destitute a few years down the line, without the means to obtain support or housing, is also morally wrong.

Money in trust for vulnerable adults is sensible and proper.

This is the Money Matters board, btw; not 'AIBU' or 'Let's Slag Off A Scrounger'.

Although perhaps the @OP will now perchance reveal her relative is Stan Ogden who has had a 'bad back' for twenty years. These really are strange days here.

@Member869894

Chloemol I disagree. It's no worse than taking advice from an accountant as how best to minimise tax liability

That's also morally wrong when it's stretching legality to the limit or not the spirit of how the regulations were intended.

Eg all the weirdy off shore loan schemes that people are now being caught up by.

Same for highly paid individuals paying themselves a combination of NMW and dividends (in the past, I am aware that the tax advantage is less than it was) or what the employment agencies did to the construction industry by creating a load of agencies and umbrella companies that meant that instead of builders and other trades being directly employed on decent hourly rates to work, they had to go through an agency and umbrella company, who both took their cut and paid them NMW plus a confusing myriad of expenses and bonuses that meant that they earned somewhere near a decent hourly rate but not quite, and paid less tax and NI in the process.
Again, thankfully seems to be less of an issue than it was, but going back a few years, if you wanted to work on a building site, that's what you had to play ball with, probably also supply teachers and maybe others.

But I agree that directly giving the brother on benefits £50k that's going to mess up his entitlement and cause problems further down the line, especially if he uses the money to have a good time for a few months or so rather than do something like retrain, may not be in his best interests, but the morality would depend on whether he's genuinely sick, or if he's a 'Stan Ogden' type.

@Member869894

Chloemol I disagree. It's no worse than taking advice from an accountant as how best to minimise tax liability

Tell me why a person on means tested benefits paid for out of working peoples taxes should not be affected by an unearned gift of money? Your brother hasn’t earned it. If he is in receipt of PIP and will never be in a position to support himself, that’s a different issue and as others have suggested the money could be placed in trust. Is this your brothers situation? If so, then presumably your DM is already funding him to some extent?

Putting the money into trust so that it is distributed bit by bit over his lifetime sounds sensible. Otherwise it will last five years max

www.litrg.org.uk/tax-guides/disabled-people-and-carers/trusts-disabled-people

Some info

Thank you Flyingin and Soontobe60

And JamieLee curtains thank you too.

Round our way he could literally buy a house outright with £50k. Not sure it would help if he didn't have any money left to maintain it, but it would get it spent quickly!

Blimey where.do you live Love51?

It always amuses me when the disbelieving posters comment on £50k houses.

Prices aren't quite that low here, but you could certainly get a 1 bed flat or terraced house for under £100k and there's plenty of places across northern England and some areas of Wales where the £50k property is commonplace.

However, if the OPs brother did spend his inheritence on a property, it might not help his financial situation as he'd then not get HB and would be responsible for maintenance.

Do whatever you can to help him keep his benefits AND the £50k.

Morally wrong? No.

Tina Green getting a £1.billion dividend paid to tax haven from a Group her husband Philip progressively screwed into administration - THAT is morally wrong.

Helping a sick man have a slightly easier life? That, in my book, is morally right.

I completely agree with @SillyOldMummy, and amazed at the negative comments here. I assume due to jealousy?! It’s £50k for goodness sake - not £50m) that I assume parents have worked hard for.

Soon you’ll be arguing the siblings don’t have to give up their jobs to support those unemployed?

Look into trusts they can be expensive to set up but I think the safest option for your brother and to ensure your Mum’s wishes are met.

Go to a decent and recommended solicitor and they should be help to you. If you have an IFA ask for their views too.

Happy Christmas!