UC and SMP paid in a lump sum

Cl was in receipt of UC for help with housing costs and in FT work which ended in Nov when her company closed down. She received a payment of £6k for SMP in a lump sum, PILN, wages and holiday. She was not entitled to redundancy pay. She has not received UC since. Her baby has now arrived. She has no income and used the lump sum to move from her room in a shared house to a PR property. No disability or health problems.

Is she subject to the Surplus Earnings rule? Is there any work around as she has no income? Wondering about Reg 61 (https://www.legislation.gov.uk/uksi/2013/376/part/6/chapter/2) and whether the SMP can be treated as having been earned in future APs (apportioned as on legacy benefits)? This would entitle the cl to the lower work allowance.

Calculation shows that the benefit cap would be applied to her but for the grace period if she has no earned income- if she is subject to surplus earnings and has no UC for several APs, will the grace period apply when she becomes entitled again?

I would really appreciate any thoughts.