Inheritance Question

[Zenduri]

I know this isnt the place to ask and it will no doubt draw some fire from some people, plus im being overly vague but whatever...

Person "A" will come into an portion of a larger inheritance with their share worth roughly £25k at some point in the very near future from a relative. When they receive the inheritance this will effect their pension and entitlements in a negative manner which would then mean they burn through the money with no benefit to them. Person "A" has openly stated they dont want the money due to this and would prefer to pass this on to Person "B", their child for them to benefit from the money.

My understanding of the situation would there is no way Person "A" can take receipt of the money and pass to Person "B" without this being seen as hiding the money when it comes to Person "A"s pension and entitlements so therefore the only option to avoid legality issues and to give the money to Person "B" is for the will to be changed prior to the inheritance being fulfilled?

For context the person the inheritance is coming from is still currently alive but rapidly declining with no positive outlook.

 

[peterwalkley]

I assume this is because the 25K lump sum would put person 'A' over the limits for means tested benefits ?

In essence you're correct though. The will should be amended before the person dies. Otherwise all person 'A' can do to avoid the problem is reject the inheritance and then the 25K would be distributed to the other beneficiaries.

 

[DeliciousStorage]

My understanding of the situation would there is no way Person "A" can take receipt of the money and pass to Person "B" without this being seen as hiding the money when it comes to Person "A"s pension and entitlements so therefore the only option to avoid legality issues and to give the money to Person "B" is for the will to be changed prior to the inheritance being fulfilled?

Your understanding is correct. Person A can also refuse the inheritance, but they cannot decide who receives their share.

 

[Zenduri]

Your understanding is correct. Person A can also refuse the inheritance, but they cannot decide who receives their share.

In essence you're correct though. The will should be amended before the person dies. Otherwise all person 'A' can do to avoid the problem is reject the inheritance and then the 25K would be distributed to the other beneficiaries.

Thats what i thought, however doing some research ijust came across a "deed of variation" which seems that Person A can essentially reject the inheritance within 2 years of the death and agree that all of their share goes to a third party so person "B" in this instance. Not sure if im interpreting this correctly

 

[arknor]

I assume this is because the 25K lump sum would put person 'A' over the limits for means tested benefits ?

seems

Universal Credit

If you or your partner have £6,000 or less in savings this will not affect your claim for these benefits.
If you and/or your partner have £16,000 or more in savings, you will not be entitled to Universal Credit.
If you and/or your partner have any savings or capital of between £6,000 and £16,000, the first £6,000 is ignored.
The rest is treated as if it gives you a monthly income of £4.35 for each £250, or part of £250.
Example

• You’re claiming Universal Credit and have £7,000 in a savings account
• The first £6,000 of it is ignored
• The remaining £1,000 is counted as giving you a monthly income of £17.40
• £1,000 ÷ £250 = 4
• 4 × £4.35 = £17.40
• £17.40 will be taken off your monthly Universal Credit payment.

can they not just accept a certain amount that doesn't put them over the limit

if you had 16k it seems the first 6k is ignored and you probably wouldn't be all that much worse off, just keep a few grand in the house or pay off a bunch of bills.

even over pay on your electric etc

 

[Zenduri]

can they not just accept a certain amount that doesn't put them over the limit

if you had 16k it seems the first 6k is ignored so essentially you could have 16+6=22k ?
I guess your benefits would be almost 0 though until some gets spent or given away

They would rather the money skips them completely and that its put to a positive use. The person receiving the inheritance is already well over the retirement age so as stated in posts above it would effect their entitlement and drain a decent chunk of the inheritance so they have gone with the idea of just bypassing them altogether as they dont need it and would rather pass it on down the family for it to be used in a more productive and beneficial way.

 

[Slam62]

You can't go against the instructions in the will,

Personally I think its disrespectful, sounds like person A is just being silly and over dramatising, take the money.

 

[peterwalkley]

For the rules around a Deed of Variation, refer to the .gov website here: https://www.gov.uk/alter-a-will-after-a-death

From a quick look, they're mostly concerned about whether it would impact the IHT rules, not means testing ... so you may well actually be able to do what you want with this. Make sure the executors of the will are aware of the change as soon as possible - but don't expect anything to be quick. Handling a will takes forever (my mum's took nearly a year and it was a simple 50/50 split between me any my brother) and COVID has made it all worse.

The easier option would probably still to get the will changed if at all possible - then there's no doubt or faff involved.

 

[Slam62]

If you change anything, all the beneficiaries must agree,

 

[Zenduri]

For the rules around a Deed of Variation, refer to the .gov website here: https://www.gov.uk/alter-a-will-after-a-death

From a quick look, they're mostly concerned about whether it would impact the IHT rules, not means testing ... so you may well actually be able to do what you want with this. Make sure the executors of the will are aware of the change as soon as possible - but don't expect anything to be quick. Handling a will takes forever (my mum's took nearly a year and it was a simple 50/50 split between me any my brother) and COVID has made it all worse.

The easier option would probably still to get the will changed if at all possible - then there's no doubt or faff involved.

If you change anything, all the beneficiaries must agree,

My reading of that is only the person who is forgoing their inheritance and passing it to another person has to agree. I dont think there would be any issues with all beneficiaries agreeing anyway. As said above it would make sense to change it now before the death though.

 

[Haggisman]

Personally I think its disrespectful, sounds like person A is just being silly and over dramatising, take the money.

How is it disrespectful exactly? If the testator wanted the money to go directly to the DWP (which is basically what the outcome of this would otherwise be), do you not think they would have put that in their will instead?

 

[Uther]

Getting the will changed would probably be the safest option. The amount would certainly affect any benefit entitlements, but I'm not sure why it would affect a pension.

 

[Zenduri]

How is it disrespectful exactly? If the testator wanted the money to go directly to the DWP (which is basically what the outcome of this would otherwise be), do you not think they would have put that in their will instead?

This. Basically the Testator has assets which have been sold and wants to pass the money on, Person A is longtime retired, 60 years hard work, the money will impact their entitlement and basically end up being given to the government anyway so rather than that they want to pass the money to person B to help with a house deposit basically.

 

[Pipe & Slippers]

I dunno whether you can still do it, but after someone has died, if ALL the beneficiaries are in agreement, you used to be able to execute a deed of variation that could basically change the way the estate is distributed - would seem like a solution provided there's no infighting
That way Person A can never be deemed to receive, or to have avoided receiving, that lump sum

Edit: A deed of variation allows beneficiaries to redirect their entitlement to another person. It can be used by anyone who inherits from a will, or rules of intestacy if there is no will in place. To be valid, the deed of variation must be completed within 2 years of death.

 

[dowie]

Thats what i thought, however doing some research ijust came across a "deed of variation" which seems that Person A can essentially reject the inheritance within 2 years of the death and agree that all of their share goes to a third party so person "B" in this instance. Not sure if im interpreting this correctly

Was about to reply to say look into a deed of variation, pretty sure my grandmother used one to bypass herself and give to my mum and her siblings when a relative died.

 

[wonko]

I was also going to mention the Deed of Variation too. It's not an 'all or nothing' thing, so Person A could choose to divert enough of the inheritance to keep themselves under any DWP thresholds. How the DWP would view someone deliberately declining money which would reduce their benefits might be a concern though.

 

[a1ex2001]

Was about to reply to say look into a deed of variation, pretty sure my grandmother used one to bypass herself and give to my mum and her siblings when a relative died.

Was going to say the same thing, my
Mum used one to pass her share of her dads estate into me and my siblings it was all very straight forward and isn’t unusual at all. My parents didn’t need the money so it was easier and better financially for it to come straight to us.

I would recommend taking appropriate legal advice but it is a pretty basic and common thing.

 

[platinum87]

Sorry but I don't quite understand how you can not take the money, then simply pay it to someone else, whoever you want to.

Having savings reduces your benefits or completely excludes you from them, but that's if you keep the money, if you spend it, or give it away, you don't have any savings.

 

[Uther]

Sorry but I don't quite understand how you can not take the money, then simply pay it to someone else, whoever you want to.

Having savings reduces your benefits or completely excludes you from them, but that's if you keep the money, if you spend it, or give it away, you don't have any savings.

Doesn't work like that. If you give it away or spend it to get benefits they treat it as if you still have it. Deprivation of assets and notional capital.

 

[platinum87]

Doesn't work like that. If you give it away or spend it to get benefits they treat it as if you still have it. Deprivation of assets and notional capital.

Well in that case there is no way around it. Changing the will still counts as deprivation of income/assets, as does simply refusing the money.

So i guess just take the money and transfer it to person B. Person A should be worried about death knocking on the door, and not care the slightest about HMRC.