I am on disability allowance and work part-time in a clerical role. I pay rent with the help of the HAP scheme.
My father passed away and his house is being sold. I am likely to inherit €300,000 from the house sale and €50,000 from other money.
With this inheritance, I will be in the fortunate position of becoming a homeowner for the first time. I will need to buy a house outright as I would not be eligible for a mortgage. My concern is that it will take time to find a property within my budget and locality. During that time, the inheritance will be sitting in my bank account.
It’s my belief that the disability allowance, HAP and medical card would be stopped once the inheritance is sitting in my account. However, once the lump sum is tied up in the purchase of a house, I would be eligible for disability allowance and medical card again.
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Is there a way to hold the inheritance without this having a negative impact on my disability allowance, HAP and medical card, to give me sufficient time to find a property suitable for my needs?
Ms S.D.
Inheritance is generally a positive event for people, a windfall that allows them to do things their regular income or existing financial position would not permit. But when you are on a welfare payment, inheritance can be as much of a worry as a boon.
The sad thing is that, with a bit of forward planning, much of the uncertainty – and financial cost – could be avoided. People all too often rush through the process of drawing up a will, trying to take care of loved ones without necessarily pausing to consider their individual circumstances – whether than means one person needs to be treated more generously than others, or whether a different approach is required to take account of their specific financial position.
You do not give any indication of whether you are the sole beneficiary of your father’s estate or whether it is something you are sharing with siblings or others. In any case, for you, it is now too late to address the steps that could have been taken under your father’s will to ensure you inherit what was intended without undermining your access to your disability payment.
The position with the Department of Social Protection and entitlement to welfare payments is simple. Either you are entitled to certain payments by virtue of your circumstances and your previous social insurance (PRSI) record, or you are entitled to them based on your limited means.
Disability allowance is one of the latter and so it is paid according to your means – hence a means test. As you are all too well aware, this includes both any income you have and also any savings or other assets that you own.
There is some relief in both these categories. You mention that you work part-time in a clerical role. Anyone on disability allowance can work and earn up to €165 a week without it being considered for the means test. On earnings between €165 and €375 a week, half of that money is exempt from consideration as income for means test purposes. However, the balance does come into the means test mix as does anything you earn above the €375 weekly figure.
In terms of capital – which includes savings such as this inheritance – the figure that is exempt from the means test is more generous under the disability allowance test (€50,000) than most other welfare assistance payments, where it is €20,000. There is also an exemption on your home so once you actually own a property, its value would not be taken into account in the means test.
But until then, you are considered to get €1 in weekly income for every €1,000 of savings between €50,000 and €60,000 and €2 in income for €1,000 on anything beyond that up to €70,000. Over €70,000, every €1,000 is seen as giving you weekly income of €4. So, under the figures you are talking about – around €350,000 – you clearly will lose all of your current payment.
These are subsistence payments and not intended to benefit people who are seen as having sufficient financial capacity to look after themselves. And there is an onus on you to inform the department as soon as you actually come into this money, ie as soon as you have access to it but not until then.
At that point, the department will crunch the numbers once again and, as you are fully aware, will decide that you no longer meet the financial qualifying conditions for disability benefit.
But that puts you in a very difficult position as you clearly do rely on this welfare payment and will do so once again after your inheritance is used to purchase a home. And there will be an inevitable delay in getting payment back up and running which has the potential to cause you financial hardship.
The best I can suggest is that you start scouting the property market immediately, even while the process of selling your father’s house and paying you your inheritance continues. You need to reduce the gap between receiving the inheritance and buying a home as much as possible to avoid your welfare payment being cancelled or your inheritance being reduced by your ongoing day-to-day financial requirements.
Ideally you will have identified a suitable property and can trigger the purchase as soon as the funds become available.
Having said that, we all know how challenging the property market is at the moment. The supply of available homes is at historic lows, according to industry assessments, and finding something suitable in terms of size and location within your means following the inheritance is much easier said than done even before you consider the additional complications of funding a deposit or finding the wherewithal for the inevitable legal and other fees that the home purchase process entails.
But the bad news for you is that there is no exception and no path I can see to you losing your disability allowance once you receive your inheritance, at least until you have used the bulk of it to purchase this home. And depending on what your net income is once you consider any interest or other return on this €350,000 on top of your earnings, your HAP payment could also be at risk, along with other associated payments such as medical card access and even the living alone allowance.
And, as you say, the obvious concern is that, in the absence of disability allowance, you will eat into the inheritance that is presumably designed to ensure you at least have the security of a home.
It is of no help to you at this point but there are steps that other people looking to leave an inheritance to someone on means tested welfare payments can consider.
First, most obviously, rather than selling the property, they could just leave the home to the person they wish to benefit. If the recipient actually lived in the home for the three years before receiving it, they would not even have to worry about inheritance tax as it would be exempt under the dwelling house exemption. But even if not, as it is valued at around €300,000, you would still come in under the tax exemption threshold of €335,000 from inheritances received from parents. And you would not lose your entitlement to welfare as you are entitled to own a home outside the means test.
Mind you, with the additional €50,000 in cash that you also mention coming your way, you will have a capital acquisitions tax bill of just under €5,000.
In this case, I suspect that there might be others also benefiting from the sale of this property which is worth more than €300,000. That complicates matters. However, an alternative approach is for the donor to purchase a property on behalf of the welfare recipient which they can inherit hassle-free on the donor’s death, or even before them. Or make provision in the will that the inheritance shall be a property acquired from the proceeds of the estate on your behalf.
Either would avoid you having lumps of cash sitting in an account, disbarring you from your weekly disability and other associated benefits.
Inclusion Ireland also notes that people can use trust funds to benefit a child in a will. The advantage is that the money in the trust will not block your access to social welfare payments and, generally, one-off payments from such a trust will not be assessed as means, so it could be used to manage the property purchase without seeing you lose your weekly allowance payment.
There can, however, be tax issues with trusts and anyone considering such an approach would be well advised to secure specific legal and tax advice in advance of making such a decision.
Please send your queries to Dominic Coyle, Q&A, The Irish Times, 24-28 Tara Street Dublin 2, or by email to dominic.coyle@irishtimes.com. This column is a reader service and is not intended to replace professional advice
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