Inheritance while on Universal Credit: what are my options?

[Stressedmum6761]

Hi everyone! 👋 I'm currently losing my marbles and need to speak to anyone who's been in the same boat.

My nanny passed away nearly 2 years ago now and it's taken a while for her things to be settled and sold etc. My family passed me a letter today addressed to me from my sweet, beautiful nan and a cheque for nearly £12K. I've been in absolute bits all day I keep bursting into tears. I've never had this much in my life and never ever expected anything from my nan at all and it's absolutely thrown me.

The thing is I know I should be absolutely THRILLED with this money, I'm on my own with DD who's 6 now. We've just moved into a council house 2 months ago and I'm on UC top up which also covers my rent, my job doesn't pay well but it's a school job and I get my holidays off with DD. I'm panicking more than anything because I know that as soon as I cash this cheque UC are going to deduct money each month (about £120 if my maths is correct).

My family said they know nan wanted me to put a deposit down on a house, which again I know if I get a mortgage my UC stops and I'm financially liable for the payments and any repairs etc if anything goes Pete Tong.

I'm thinking about just putting most of it in a LISA for now and potentially in the future buying a house...maybe a once in a lifetime holiday with the rest. I'm just torn because if I buy a house, I'll be so much worse off than I am now getting help from UC with rent payments etc. I've just moved into this house and started decorating and making it my own. I'm worried about the money sitting there and me being so scared to spend anything while also having money deducted from my monthly payments. Again, I'm absolutely ecstatic I've got this chunk of money for security but the fact that it's going to effect me whether I spend it or not is flapping me to the core.

What do I do? Has anyone had experience with coming into money while also being on benefits? Thank youuu from a very emotional and stressed mum.

1. The figure you’re calling the benefits bill includes the state pension
2. the reason income tax doesn’t cover it might just be because the wealthy enter into tax avoidance schemes so as someone said thread the problem is actually the rich. So easy to blame someone like the OP though who actually has very little, isn’t it.

I asked Claude AI on your behalf and he said you would lose approx £100 a month with that amount of savings in the bank (until it is spent). But he said you could pay down other debts or take a holiday, etc. He did mention that if you pay it into a pension, it will not be deducted. He also said you should speak to Citizen's Advice Bureau for other advice.

If you are renting, do not spend it on decorating! Your landlord is responsible for that and he might raise your rent if the house is in much better decorative order (I know someone this happened to).

Another poster suggested shared ownership, which might be an idea worth looking into?

Anyway, good luck - in the future, just ask AI because it won't moralise at you like some of the PPs. I am sorry for your loss and congrats on the windfall! If it were me, I might just go on a splurge shopping spree, take a nice holiday with DD, pay off all my debts, and put the rest in a pension to grow it.

You absolutely cannot call people beggars in that way. Reporting.

@Stressedmum6761

There is a UC calculator on the internet which allows you to key in your situation with estimated finances and when completed shows you your likely payment. I did this to assist a DS who has been made redundant with a final payment of £20000 redundancy money.

My understanding is that there is an upper limit of savings and the like which "may" be about £6000 and above which you do not get UC until the excess has been used up. Even that is not easy in that you have to convince them that you are using the savings prudently for living expenses rather than "depleting capital".

OP won't be coming off benefits due to this inheritance. Their monthly amount will be reduced according to the tariff deduction regulations until such time as her savings are reassessed as below £6k. So your comment of now you can and will need to support yourself is just your opinion, it isn't that of the DWP.

It’s enough for a deposit on a 110k house with the right mortgage broker, my friends just bought a 140k house with a 10k deposit. Her issue will be getting a mortgage.

OP, the best thing you can do to elevate yourself out of dependancy and poverty is to train as a teacher.

You could do a Teacher Degree Apprenticeship programme, where you stay employed at a school, working four days a week, and spend one day a week studying for your degree online or at a local college/university.

This is funded by the government so your tuition fees are fully paid for by the government or your school and you continue to receive your regular salary from the school while you study.

Best bit being on UC is a big advantage here because the rules are highly protective of single parents who are studying or training.

As a single mother responsible for a 6 year old dc, you are legally exempt from the normal rule that bans students from claiming Universal Credit. You can train to be a teacher and keep your Universal Credit open.

After declaring your inheritance to the DWP, this is what I recommend you do. As a salaried teacher you still have the holidays and school hours.

How Savings Affect Payments

• Under £6,000: Your savings do not affect your Universal Credit payment.
• £6,000 to £16,000: You lose £4.35 per month for every £250 over the £6,000 threshold. Any leftover amount that is less than £250 still counts as a full £250 block for a deduction.
• Over £16,000: You are not eligible for Universal Credit.

so having £12000 in savings you would lose £104.40 a month off your current payment. You have to declare it as soon as it hits your bank.

If you read all of OPs posts you will see that she is not attempting fraud or deception nor is she planning to hide the inheritance. So I think you are actually being unfair. There are several legitimate uses for capital and savings within the UC regulations.

What THEY said. 👏

The regulations are straightforward. Deduction of £4.35 per £250 of amount over £6k. Over £16k no entitlement except under disregard exceptions. Claim if £16k with no applicable disregard will remain open for a set number of months. If capital remains above £16k for this period the claim will close. If the savings reduce to under £16k and DWP accept legitimate expenditure within the time frame of the claim still being open, UC will go back into payment with the relevant tariff deductions. If this produces an entitlement amount of less than £0.01 after tariff applied, the claim will still end.

In addition to getting a mortgage, OP will be challenged with the costs of upkeep—£3k for a new boiler, £10k for roof repairs, etc.

'Net contributors' - ugh!!! The sooner we move away from this terminology the better, it's incorrect and inflammatory.

Every single person uses a myriad of public services (highways, clean air, government, planning, the civil service, national security, etc etc) and every person's peaceful and safe enjoyment of life, and ability to make money, is dependent upon those services. It's a nonsense to imagine that if you pay tax and don't claim benefits then you don't cost anything and are not part of any wider economic system, other than as a contributor.

The term has the effect of implying that people on lower wages in education, nursing, elderly care, waste management and any number of other roles aren't 'net contributors'. Which would be incorrect, as what we get out is worth far more than what we put in, both in economic terms (in their enabling the function of our economy and society) and in terms of both maintaining decent living conditions and enabling future prosperity.

It’s so punitive and shortsighted. It shows a real lack of awareness of the complex causes of poverty and how hard it is to lift yourself out of poverty. Even if you take away the humanity side, it’s not economically sensible. This is a chance to use the money to help towards financial stability in the future - course, house deposit etc that would be good for public purse.

She will get mail addressed to her at your address at 18 so she will know how much she has. She should have been notified of the account's existence at 16. Did you mean you want to hang onto the control past 18?
The money will need to be cashed/reinvested at 18. It's always a risk giving young adults money but they are entitled to the CTF once they are legally adult.

If this is indeed what the OP is doing, (and I'm not sure she is,) so what?

The vast majority of people would. Plenty of people hide extra income to avoid paying extra tax. People who are WAYYYYYY better off financially than the OP, (and most posters on this forum!) People (and companies) who earn multiple millions a year look for every trick in the book to avoid paying taxes. Many people use tax avoidance tactics. Millions do it!

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OP, ex benefit adviser here. Obviously you have to declare the inheritance to UC otherwise you’ll land yourself in trouble and your benefit will likely be suspended while they investigate so it’s not worth the hassle. You’re allowed £6000 in savings before it affects UC. You are also setting up a new home, so it’s perfectly reasonable for you to spend some of the money on essential items - furniture, beds etc. when you declare the money you’ll likely attend the jobcentre for interview to verify things and you can explain your circumstances then. They should be able to advise you on what you can spend some of the remainder of your money on without it being viewed as deprivation of assets.

You’re correct in that if you use the money for a deposit on a house you will be worse off on a day to day basis because you’ll lose the rent element of UC. It might be some help to know that although there’s no UC equivalent for help with mortgage payments, there is something called Support For Mortgage Interest (SMI).

SMI is basically a loan from DWP to help pay interest on a mortgage or home improvement loan - it doesn’t help with the capital amount borrowed. You must be in receipt of UC or other qualifying benefit for three consecutive payment periods before it starts and it can pay the interest on a mortgage of up to £200,000.

You don’t have to sell your home to repay the loan - repayment is only triggered by specific events and the loan and accumulated interest continue to build up, secured against the property via a charging order. Repayment becomes due on selling or transferring ownership or when you pass away/death of surviving spouse. You can choose to make voluntary payments toward the loan at any time to reduce the total balance and interest, and if you want to move to a new property you can usually transfer the loan to your new home.

Some of the comments here are horrible OP - always happens on benefit threads. Ignore them, you do the best you can in life with what you have at the time and as long as you’re upfront with DWP you’re not doing anything wrong in wanting to safeguard a lump sum you’ll likely never have again.

@Stressedmum6761 probably obvious but do keep receipts for your legitimate spends as it will make the review of your UC much smoother.

@Stressedmum6761 £12k is a very handy amount but it is not a fortune.

Firstly, DO NOT even think about getting a mortgage in your current financial circumstances. As you have a council house, you are very fortunate and unless your financial circumstances change a lot, you would be crazy to give it up to take on the risk of a mortgage, which you can ill afford, and might mean losing the mortgage property (if you can even get a mortgage on your current income), and then ending up with a privately rented home at high monthly rates.

Secondly, you won't be affected at all by a reduction in Universal Credit once your savings fall below £6k. You have debts just now. The car, the credit card etc. Perfectly reasonable to pay them off, reducing that £12 k even more.

I would speak to someone like citizen's advice, about what UC would consider unreasonable expenditure - but spending some of it on stuff for your new council house might be considered an ok thing to spend it on?

The biggest problem is that you might have to constantly update UC on the current level of your savings, every time it drops due to expenditure on what UC consider to be reasonable stuff until your savings are at £6k.

Seems to me that you are getting a hard time on here, but you really haven't been given a fortune, and it won't last very long, given the reasonable expenditure you will need to spend some of it on.

Agree. It’s always been the case that benefits claimants are allowed a savings threshold. It allows for a bit of autonomy and saves the tax payer money because they’re then not dependent on the state for every little thing that arises. The £6000 minimum hasn’t kept pace with the cost of living and hasn’t changed since 2006. Studies have shown that it should be at least twice that amount to allow a decent cushion from added reliance on the state.

Yeah this. ^ £12K is nothing these days. As a pp said (maybe @XenoBitch apologies if I am wrong...) getting a small-ish inheritance like £12K can be a poisoned chalice. It's an amount that will affect your benefits and make them be reduced for many months until the surplus has disappeared, but it's not enough to make a huge difference to your life either.

Who can blame someone (who is struggling,) if they try to hide it/not declare it.

The OP is NOT doing this, she is intending to play by the rules and only wants to inform herself on Mn. However in answer to "so what?", failing to declare a lump sum while claiming UC is illegal and constitutes benefit fraud. Tax evasion is also fraud. Individual fraud is a drop in the ocean, but multiply it and the system breaks.

The DWP manages claims for roughly 24 million people. According to DWP data, annual benefit overpayments due to fraud reached £9.9 billion, with £6.7 billion originating from UC. It all adds up.

Disclaimer, OP is not planning to keep any assets hidden, so is not defrauding anyone. I do hope for her sake as she sounds young that she can do some training and become a teacher on a better salary.

Hi @Stressedmum6761 , I've nrtft, only your replies, so apologies if this has already come up.

If you don't want to get a mortgage you could look at interest only repayments. Then you can increase them once your child is a bit more independent or you can get a pay increase.

My son did this - i thought be was a bit mad - he invested any extra money he had and made more, plus sold at a profit 5 years after buying. This meant he paid off all the original mortgage and had money stashed in investments. (We are talking similar house prices to what you have mentioned).

I know some people will disagree, but it may be a solution, should you want to use the money as a deposit. It is a risk, but for some, owning a house is their ultimate goal and you may not have this opportunity again.

But it’s not what people want her to do..it’s the way the system works. There have been some very nasty posters on this thread but I think the majority of us have just been pointing out that benefits will be impacted. But people have also given some really good advice on how OP can be better off.

Sorry about your Nan and it’s lovely she left you some money.

I think if it were me, I’d stop spending any money on the council house, and investigate buying a house. However I don’t know how the numbers stack up for you? You might not want to share your salary and UC amounts on here after some of the comments. A 30 year mortgage would be about £530 a month - it depends how affordable that is for you. Or as someone else suggested, put it in a LISA and take the universal credit discount, and investigate the right to buy.