Brother on disability allowance fears financial cost of inheritance

Our family home will be sold soon. Our parents willed it to us, their children. Our parents are deceased now. One family member is on a low disability allowance and has no other income. This person will inherit an equal part of the proceeds of the sale.

I expect the maximum each will get would be about €40,000. There is no other money in the estate and none of us have received any other funds from our parents. How will the inheritance affect the welfare benefit of one of the siblings?

Ms N H, email

It is depressing how much stress a little good fortune can cause. For most of us, if and when the time comes, an inheritance is something that allows us the liberty to do what we might not otherwise have the chance to – pay down the mortgage, have a dream holiday, finally afford that long-planned upgrade of the home.

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But for others, a small number but among the most vulnerable, an inheritance can almost be a source of dread. These are people who are already on very limited incomes – the sort of people who you might expect would most welcome a financial windfall. However, because that income is from the State in the form of welfare payments, it is very often means tested.

It’s not that means tests are manifestly unfair. The State clearly has a responsibility to ensure that it is providing for the vulnerable, those without the means to care for themselves. Notwithstanding the recent political stunt where it was announced every family will receive €100 off their energy bills in the new year regardless of financial circumstances, people who pay their taxes expect that those who can support themselves do so.

But means tests can be a blunt tool as well.

To qualify for disability allowance your brother will be substantially restricted in working because of an injury, a disease or some physical or mental disability

And it can certainly seem harsh that someone who receives a once-in-a-lifetime financial windfall via an inheritance should lose their welfare payment – or see it fall dramatically – when a sibling in better financial circumstances will be able to use the same money to get something they might not normally be able to afford without financial punishment.

And, of course, as inheritances – especially the sort of sums you are discussing – are not life-changing as in they don’t provide for the long term, the person on benefits will inevitably have to go back through an often bureaucratic maze somewhere down the line to get back in line for necessary State financial support.

The good news here is that your brother will likely not have this worry – but only because of the relatively modest scale of the inheritance and the particular rules around savings for people on disability allowance.

To qualify for disability allowance your brother will be substantially restricted in working because of an injury, a disease or some physical or mental disability with which he had already lived for at least a year and from which he expects no respite for at least another year.

Means test

The payment – currently a maximum of €203 a week, a figure that will rise to €208 in January – can be sought by anyone in those circumstance over the age of 16 and can continue until they are 66 at which point it transfers to a pension.

The means test looks at both your cash income and your savings.

You note that your brother has no other income but, for those who can, it is possible to work while retaining their full disability allowance. The first €140 a week earned is entirely ignored by the means test. It considers 50 per cent of any weekly income between €140 and €350, and the full amount of any income above €350 a week.

For those who are working, they are obliged to notify the Department of Social Protection and provide proof of your earnings.

While I hesitate to say anyone on disability allowance is lucky, in this one instance, the payment he receives will work to his benefit

On savings, the critical issue for your brother is that the first €50,000 of savings are ignored by his means test. Within welfare payments, this is unique to the disability allowance.

In normal circumstances, savings for people on social welfare are exempt only up to a limit of €20,000. If that were the case here, his €40,000 inheritance would knock €30 a week from his welfare payment.

While I hesitate to say anyone on disability allowance is lucky, in this one instance, the payment he receives will work to his benefit. I don’t know if he already has some savings but this inheritance will not, by itself, bring him above that threshold – at least on the basis of your best guess of the valuation of your parents’ home.

The €40,000 you expect he might receive will give him a welcome savings buffer without penalty.

People on disability allowance can, in addition, qualify for extra welfare benefits and also, where eligible, for supplementary allowance. I don’t know if that applies to him, but if it does, he would fall foul of the capital means test on supplementary allowance, which exempts only €5,000 in savings.

Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street, Dublin 2, or by email to dcoyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice.