At present, I receive disability allowance and work part-time in administrative duties. The HAP Scheme assists me in meeting my rental costs. The demise of my father has led to his residence being put up for sale, and I anticipate to receive an inheritance of €300,000 from the sale and an additional €50,000 from other resources.
This inheritance will provide me with the fortunate opportunity to be a homeowner for the first time, as I’ll need to purchase the property in full due to my ineligibility for a mortgage. The challenge lies in the possible prolonged duration to find a property suiting my budget and location, during which the inheritance would remain idle in my bank account.
My understanding is that my disability allowance, HAP, and medical card would cease once the inheritance is deposited in my account. However, once this large amount is used in the home purchase, I’d regain eligibility for the disability allowance and medical card.
Is there a procedure to keep the inheritance without affecting my disability allowance, HAP, and medical card, to afford me enough time to find an adequate property?
Ms. S.D.
Inheritance usually presents a financial boon, offering individuals opportunities otherwise inaccessible through their routine income or existing financial circumstances. However, for welfare recipients, it can also bring unforeseen worries.
Regrettably, a little foresight could have avoided much of the financial uncertainty and expenses. Drawing up a will often hastily done without considering the individual situations of the benefactors – whether someone requires a grander portion or if particular financial conditions need a unique approach.
You’ve made no indication if you are the sole inheritor of your father’s assets or sharing it with siblings. Regardless, it’s now too late to rethink the measures that should have been outlined in your father’s will to maintain your access to your disability payments.
The stance of the Department of Social Protection in terms of entitlement to welfare payments is clear. Your eligibility depends either on your situation and previous PRSI contributions, or on limited means.
Disability allowance, determined by a means test, takes into account both your earnings and assets such as savings. If you possess a part-time job, let’s say in a clerical position, the means test will not consider earnings up to €165 per week. If you earn between €165 and €375 per week, half of this sum is excluded from the income assessed by the means test. Any earnings beyond €375 per week, as well as the remaining half, however, are taken into account.
In the case of assets, the situation is a bit different. If you have savings (like the inheritance you’re speaking of), the first €50,000 will not be considered by the means test, a much higher threshold than the €20,000 with most other welfare assistance payments. Furthermore, the monetary value of your owned property will not be factored into the means test.
As for savings ranging between €50,000 and €60,000, they’ll be viewed as a weekly income of €1 per €1,000 saved. Beyond €60,000, through to €70,000, the rate doubles. Past €70,000, each €1,000 is regarded as supplying a weekly income of €4. Hence, with the sum you mentioned, about €350,000, it is likely that you will no longer be eligible for your current allowance.
These payments are intended for subsistence, not for individuals who can financially support themselves. It is imperative that you notify the Department once you receive the money, however, notification is not required until that point.
The Department will recalculate your means, and unfortunately, it will likely determine that you no longer meet the financial eligibility criteria for the disability benefit. This leaves you in an awkward state since you rely heavily on these welfare payments and will continue to do so even after your inheritance is used to purchase a property. There could be a costly delay in reinstating your payments.
The optimal advice I have for you is to start hunting in the real estate market as soon as possible, despite still being in the process of selling your father’s property and receiving your inheritance. It’s imperative to minimise the interval between gaining your inheritance and purchasing a residence, so as to prevent the cessation of your welfare allowance or the depletion of your inheritance due to your ongoing daily financial responsibilities.
In an ideal scenario, you would have spotted an appropriate property ready to invest in as soon as the inheritance comes through. However, we must acknowledge the uphill battle we’re facing with the current housing market. The number of houses up for grabs is at a record low as per industry analysis. Finding a house that is fitting in scope and location, within the budget post-inheritance, is a daunting task, even without the added layers of complexities such as raising the deposit or managing the inevitable legal and other miscellaneous costs linked to home buying.
Unfortunately, I am unable to see a viable way for you to maintain your disability benefits once you receive your inheritance, unless you use the majority of it to acquire a house. Depending on the net income left after calculating any interest or other earnings from the €350,000, there is a risk to your HAP payment, as well as other benefits such as medical card access and the living alone allowance.
Judging by your logical concern, dipping into the inheritance that’s intended for securing a home due to the halt in your disability allowance is a pressing issue. At this juncture, there’s no immediate solution but there are alternatives for those who wish to pass on an inheritance without affecting means-tested welfare allowances.
As a direct approach, they could leave the house to the intended beneficiary instead of selling it. If the person in question lived in the property for three years prior to the inheritance, they wouldn’t even have to stress over inheritance tax, as it would be excused under the dwelling house exemption. Even if they didn’t live there, since the house is valued at roughly €300,000, it falls under the tax exemption threshold of €335,000 for inheritances from parents. And the beneficiary’s welfare entitlement wouldn’t be compromised as owning a house is permissible outside the means test.
Bear in mind, the additional €50,000 in funds you referenced coming towards you will result in a capital acquisitions tax bill just shy of €5,000. Under these circumstances, it is reasonable to believe there may be additional beneficiaries from this property sale, which is valued over €300,000. This makes the situation more complex. However, it’s an option for the benefactor to buy a property in the name of the welfare recipient, which can be inherited with negligible complications following the benefactor’s demise, or even prior to it. Another approach could be to specify in the will that the inheritance is a property purchased from the estate proceeds on your behalf.
Both scenarios avoid the predicament of having large sums of money stagnating in an account, which would then preclude you from receiving your weekly disability and associated benefits.
Inclusion Ireland also points out the option of using trust funds to provide for a child in a will. The merit of this method is that the fund’s presence in the trust would not obstruct access to social welfare benefits. As a rule, one-off withdrawals from such a trust are not considered as income, thus it could be tapped into for property purchase without affecting your weekly allowance.
Nevertheless, trusts might present tax complications. Therefore, those considering this route should seek expert advice on tax and legal matters before making a decision.