Inheritance for child when the parent is on benefits

[moneyisnotfunny]

Nc and some details changed for this. My young daughter is going to inherit around £30K from her late father once the estate is sorted out through probate. I am a single parent carer on benefits and am concerned about how to handle this situation. The money will be very much my daughter's and I have been told that it is to cover her maintenance up to when she reaches adulthood. Because it is maintenance, there needs to be a way of releasing the maintenance amount per month to me for her every day living expenses. If the full amount went into my account then my benefits would stop and the money would run out long before Dd hits 18 and we would because off as a family. I hope that makes sense.
How can I keep her money safe and in her name but released monthly to help for her day to day things? Is this possible? It's around £300 a month that she got and this is the rate it would continue at afaik. I will be asking for it to be paid into an account in her name. Multiple Junior ISAs? Premium Bonds? She is 8 and any account will have to be overseen by me as her only parent/guardian.
TIA.

I would seek legal advice and expect a third of the estate on behalf of your child - that is the legal position. The adult children can’t decide to cut your daughter’s inheritance by doing a deal with you.

The claim form gives me the option to give my account or my child's account. Her account is a savings account and withdrawals can only be made once in a 12 month period meaning that I could not use this to provide for her in any way if need be. There isn't a child account available that would allow for any withdrawals until she's 11 and it needs me to oversee it anyway they have said.
I've messaged UC to see what they say about this. I don't want to end up worse off and for her standard of living to decrease while her bank account builds up until she's 18. I understand that the pension is to be used for now as it's paid monthly. I was thinking I'd take out the equivalent of the maintenance amount and put the rest in her savings for when she's 18.

The adults dc have spoken to me and the estate if any is to be split 3 ways between the dc.

And the house definitely isn’t part of the estate - it belongs to the ex-wife?

The house isn't clear at the moment. The solicitor is dealing with what's going on there. That will hopefully become clear soon. In the meantime I can apply for Dd to get the child dependent part of his pension.

There are plenty of accounts that allow instant access for a child account. NatWest for example and I have a Halifax child account for one of my DC which is the same.
I'd strongly encourage you to open a separate child account and use it for that purpose. It will be far easier to justify if you are ever challenged to show what the money is being used for.

@Andwegoroundagain we live somewhere where there are now no banks or even any nearby but there are two building societies. I'd want somewhere close by for ease.

What can the monthly pension be used for exactly? I'm frustrated that this information isn't readily available. I want to know the rules. I like rules and want to make sure I do everything right on this.

OPEN A NEW CHILD BANK ACCOUNT!!!

There are several bank accounts that can be opened and accessed for an 8 year old. She doesn't need to stay with the same bank.

HSBC
Halifax
Yorkshire building society

I think it is much better to keep your daughter's money separate from your account if you want to keep receiving UC.

The monthly amount is the pension for her as his dependent. It won't specify what it is to be used for. It should just be used for her benefit so as not to interfere with your UC.

As an example, you want to buy her a new bike. Then this could be used for that. She wants to go on school trip, this could be used to pay for that. She needs some new clothes, this can be used to pay for that. You want to refit the bathroom, nope wouldn't use for that.

In terms of banking, have you access to a mobile phone with apps? Revolut offer a under 18 account tied to a parent account and you can set all up with a mobile phone. It does have limits however and you can withdraw cash but not sure about transfers. It may be worth checking your existing bank and seeing if you can open up a child account online with them

I can open a building society account for her fairly close by.
I definitely won't be spending any of her money on home improvements! Just things she needs.

For sure I realise you weren't proposing that ! I was just making that example as an illustration...

Hopefully the BS will sort out

As far as I understand it any dependants pension is for their maintenance in the same way any maintenance her late father would have paid was, so it can be used for whatever you want.

Any lump sum however is 'hers' and can be drawn on for her education maintenance or benefit BUT it is a decision you may be asked to justify

I think no matter how it all pans out I'll get a notebook for the sole purpose of recording any spending from that money.

He worked for the government and it's a civil service pension.

I've just found this:

My child receives a dependants (civil service) pension - they were sadly too young to have their own bank account when their other parent died, so its paid into my current account. I keep clear records of how much is 'used' & how much is being kept for the future. Would this be considered as income for me when looking at income tax? Or is it still counted as income for child although its paid into my account? Thank you!

Posted 11 months ago by HMRC Admin 25

Hi SandwichYears,
The actual money paid in is still classed as belonging to your child.
Any interest that is generated though is classed as yours.
Thank you.

If it's not counted as income for tax purposes then I am thinking it won't be classed as income for UC purposes. If the payments went into my account they would surely have some kind of ref to my Dd and her father eg "dependents pension for late absent father"

I am still going to enquire about another account for her. I just like to know all the facts.

UC rules are done by DWP I think not HMRC so may be a bit different. You'd need to check with DWP

The ref on the bank transfer will likely just be something like X12234 rather than an explanatory note

See a solicitor who specialises in probate op. x

The claim form the dependent pension will be sent off as soon as I get the death certificate and I'll take it from there. The eldest knows that legally things are to be split 3 ways and equally. The only issue is the ex wife and the house and there's a solicitor looking at everything with that. I'm holding fire on my own solicitor until the house ownership is established.

Sounds good OP. You only know how it all works when the situation arises.

I'm dealing with my DB's estate, it's a learning curve.

Open an online account. You don't physically need to go in to a bank.

Definitely open a child’s bank account in your daughters name which the pension can be paid in and allows regular withdrawals, you might wish to consider a longer term savings product as well (junior isa) assuming all the monthly savings won’t be spent each month you could drop feed into the isa for a your daughter a lump sum at 18 there are accounts available for under 11s universal credit doesn’t take childrens savings into account unless they suspect your hiding capital. I do believe they need to be clearly separate from yours.

As the solicitor engaged for probate is looking into the house ownership with the ex there is no point spending on your own legal advice at this point unless you want to engage in a battle over the house for your DD, which probably would be expensive and cause family rifts.

I imagine a separate child account will be best. But Starling, which is a digital bank, let you create pots to ring fence money for specific purposes, so that could be another option. The money in you pot or pots (I think they call them spaces) doesn’t show in your main balance although it’s v easy to withdraw from them or dissolve them.

I don’t know if other banks offer something similar.

This would be dangerous territory, so I wouldn't even consider that. Stick to a child's named account.

I'll definitely open an account for her. I'm not sure how to work out how much money she is likely to get but suspect it won't actually be very much. It's a civil service pension and he worked for them for just over 20 years. His final salary was around £35,000 from what the maintenance letters say. Dd would get 50% of his pension entitlement monthly. I have no clue how to even estimate that. Does anyone know how to work it out?

I don’t think anyone can give you a reliable estimate. The civil service long since stopped being based on Final Salary - there were big changes in 2007 and 2015. So he’ll actually have payments under various calculations (although it’ll all come out as a single annual figure). Career average salary then becomes key. If he’s been on £35K for years that’s good, but if he just got a huge promotion and pay rise last year, not so good.

But to at least start you off with a finger in the air… if he’d been on £35K for 20 years, with a 1/60th accrual rate* then his pension would have been about £11.7K, making almost £6K a year for your daughter. Which I wouldn’t consider “not very much”!

*there are as I said too many changes in the pension to know what accrual rate applied to his at various times, so 1/60th is ballpark, it’s not the actual accrual rate

Thank you. I'll feel so much better once I know the amount and get this sorted. It will be back dated to the date of death I think so the first payment will be more. The in service death lump sum payment will go into a junior isa.