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Forum Home  →  Discussion  →  Income support, JSA and tax credits  →  Thread

Client lives in property to be sold to pay inheritance tax, is this disregarded for ESA (IR)?

AMuller
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Advising Communities

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Joined: 22 November 2017

Hi
My client’s mother died 3 years ago without a will. Client and his sister are the only heirs and sister has letters of administration. They need to sell her house so they can pay inheritance tax and other debts (mortgage and home improvement loan) and expect that there will be some capital left over afterwards. Client currently lives in the property.

I cannot find the section about inheritance in the CPAG handbook, I only found some DWP guidance which (if still up to date) says that the inheritance would count as capital after 12 months
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/689958/dmgch29.pdf  (DMG 20173 and DMG 29176)

In the disregarded capital chapter, CPAG Handbook p 484 says ‘if you own the home in which you normally live, its value is ignored.’  Schedule 9 ESA Regs just says ‘the dwelling occupied as the home’ without mentioning ownership.

I now wonder whether the rules for ignoring value of home you normally live in apply here?  Or do they not extend to home not actually owned by the client (but by an estate the client will be a beneficiary0 and the client is expected to take out a loan against his future inheritance?

Thanks in advance

Andrea

ClairemHodgson
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Solicitor, SC Law, Harrow

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surprised they’ve not needed a loan before now to pay the IHT.

my gut feel is that so long as he’s living in it, it should be disregarded, but i’m probably wrong

once it IS sold, he has his relevant share of the proceeds less the IHT and debts and that is his capital.

The DWP would probably say that that amount will have been his capital since the moment of death (since that is what he would have had had the property been sold then, rather than now)

but if he will be left with enough to buy himself somewhere new to live, it will be ignored whilst he gets on with buying.  So i suggest he works out what he’ll have and whether that will enable him to buy somewhere (not necessarily in the same area, since clearly if IHT is payable it’s a substantial property and he needs to be somewhere cheaper and smaller…...

AMuller
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Thanks, Claire.  I was wondering about the IHT, too, as I thought the client and his sister would have had to take out a loan to pay IHT before they would be allowed to sell the property. As far as I know, he is not expecting to be left with enough to buy another property outright, but I have not seen any figures so don’t why he assumes that.

chacha
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Benefits dept - Hertsmere Borough Council

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AMuller - 08 October 2018 03:13 PM

In the disregarded capital chapter, CPAG Handbook p 484 says ‘if you own the home in which you normally live, its value is ignored.’  Schedule 9 ESA Regs just says ‘the dwelling occupied as the home’ without mentioning ownership.

http://www.legislation.gov.uk/uksi/2008/794/schedule/9/made

Yes, it’s disregarded as long as he “occupies” it as his “home”.  Paragraph 1 of schedule 9 above.