Money writer Annie Shaw deals with your personal finance conundrums
A reader writes:
My 90 year old neighbour will shortly inherit about £60,000 from her late sister's estate. At the moment she receives some fairly generous benefits including full council tax relief and pension credit.
Because she has worked and paid tax most of her life she feels that she is entitled to this sort of state support and would be loath to lose any part of it, which no doubt she will when she has to declare a change in her financial circumstances.
Is there any way her sister's bequest can be ring-fenced to pay towards her future care without affecting her benefits? Or is there any other legitimate course of action she can take which will mean she won't have to surrender the benefits. Or should she should just accept that the unwanted windfall will deprive her of certain benefits she has grown accustomed to receiving?
Annie Shaw replies: Since so many people these days "take" from the state all their lives and never put anything back it is hardly surprising that those who work hard and pay their dues resent the shiftless and the feckless and ultimately want to take back what they see as their share of the pot.
Benefits are however an insurance scheme to support the indigent, frail, and those otherwise unable to take care of themselves.
If someone receives a windfall payment it follows that they are no longer in need of state support and should once more pay own their way.
Once your neighbour has received her inheritance she can’t "unreceive" it. If she had been trying to avoid inheritance tax, she could use a Deed of Variation to pass the money to someone else, but this doesn’t work for benefits, and nor does giving the money away or putting it all on a horse.
The state has got wise to devices that allow people to hang on to their wealth and claim from the public coffers, but your neighbour might be surprised at the number of benefits she can still receive.
She’s duty bound to declare her capital for housing benefit (if she rents her home) and council tax purposes – but she might still be able to receive at least some level of council tax benefit, particularly single person rebate if she lives alone. Also on the positive side, she might not need to declare the windfall for Pension Credit purposes if she has been given an "assessed income period" when she doesn’t need to report a change of circumstances. If she receives Disability Living Allowance, that’s not means tested anyway.
She would certainly be affected by the inheritance if she had to enter long term care as a £60,000 windfall would take her well above the level at which she could get local authority help, even assuming she had no other assets. However once that money had been eroded to below the qualifying threshold, the local authoritiy would start to pick up the bill.
Your neighbour’s dilemma demonstrates the importance of maintaining an up to date will. Her sister would probably have been wise to leave the money to nieces and nephews if leaving money to her sister was going to cause problems.
Annie Shaw is an award-winning freelance journalist who writes about personal finance matters every month in Saga Magazine.
She also writes for a range of national newspapers and magazines and is a frequent broadcaster on personal finance subjects on both radio and television, including a twice weekly slot on Radio London 94.9.
She is a former editor of the Sunday Telegraph's property section and has been a staff journalist on The Times and financial agony aunt for the Independent on Sunday.
Annie currently runs the CashQuestions.com website, answering financial questions from consumers, with the help of industry experts.
Email Annie your money questions at annie.shaw@cashquestions.com
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