Have you drafted a legally-valid will and named a beneficiary who is on benefits? If so, you may wonder about the implications for your beneficiary.
As state benefits are means-tested on a household-by-household basis, any inheritance you leave will affect your beneficiary’s entitlement.
That’s because leaving them a lump sum in your estate will increase the amount of money the beneficiary’s household has access to.
Both income and savings affect an individual’s means-tested entitlement to state benefits and receiving a lump sum will distort that.
How lump sums affect universal credit
Universal credit is usually a monthly means-tested payment available to help people on low incomes with living costs.
If your beneficiary is in receipt of universal credit, assuming they have no other savings, you can leave them up to £6,000 in your will.
A lump sum worth more than £6,000 will begin to affect their calculation, while a gift of £16,000 or more would see them lose their entitlement.
How a lump sum affects pension credit
If your beneficiary is on a low income and over their state pension age, they might be a recipient of pension credit.
This is another means-tested state benefit which offers an extra £60 a week in 2021/22, plus a raft of other benefits such as council tax discounts.
The household savings threshold for pension credit is £10,000, so any lump sum you leave a retired beneficiary will affect their entitlement.
What’s best for your beneficiary?
Unless you’re in a position to leave a significant lump sum to your beneficiary who is on state benefits, you’ll need to think about whether any drop in their benefits will be countered by what you leave them.
They will need to report any change of circumstances, either to their local Jobcentre Plus or the Department of Work and Pensions, within a month.
However, keeping the lump sum to £6,000 or less, depending on the beneficiary’s savings, would enable them to retain their state benefits.
Steps you can take
If you’re considering leaving an inheritance to someone in receipt of state benefits, seek professional advice to ensure it doesn’t affect their claims.
Our probate service includes will writing and advising testators on updating existing wills. You should also consider seeking legal advice.
We’re not the most expensive or the cheapest firm offering estate planning advice out there. You get what you pay for – a truly personalised and bespoke service.
You can email Harries Watkins Jones to make an appointment at firstname.lastname@example.org or call us on 01656 335145 to get the ball rolling today.