Will Inheritance Affect My Council Tenancy?

sarah ryan
Sarah RyanAccount Manager @ Lawhive & Non-Practising Solicitor
Updated on 22nd February 2024

When you’re inheriting a property, you will have mixed emotions. There’s a lot to mull over, and you may have to decide how to divide your inheritance between your siblings. 

Depending on your circumstances, there are a lot of implications attached to inheriting a property. We’ve written this article to help individuals understand how inheritance may affect their council house tenancy.

In this article, we explore how inheriting can affect any benefits you receive, including housing. Keep reading our expert guidance to explore how to use trusts to cut tax, as well as how to release equity to cover the costs of care and secure your financial future.

We cover:

  • Whether you can keep a council house if you inherit money

  • Consequences of receiving a sizeable inheritance

  • Inheriting a home on tenancy status

  • Transferring property into a trust

  • Legal implications and benefits of a trust

  • Whether you can inherit a council tenancy 

Inheritance as a council tenant - can I keep my council house if I inherit money?

Inheriting a sizeable amount of money or a high value property can have an impact on the benefits you can receive including council housing

In certain redistricted circumstances, the council may allow you to keep your council house if the inherited property doesn’t alter your need for council housing, or when there are exceptional circumstances. 

There’s no set-in stone answer as to whether your benefits will be impacted by inheriting a sum of money as each council has its own rules and procedures.

The impact of inheritance on means-tested benefits

The inheritance rules and how this relates to the eligibility for benefits can be complicated.

The short answer to whether inheriting money or property will impact your benefits is, it depends on the type and value of benefits you’re receiving, your specific tenancy type, the value of the property you’re inheriting and local housing policies. 

You should endeavour to contact your local council when you inherit money while you’re on benefits via their housing department or housing office to discuss your circumstances.

We should define what means tested benefits are. Means tested benefits are a type of government assistance that are awarded on the basis of the applicant’s income and savings.

The types of benefits that are affected by inheritance include:

  • Universal Credit

  • Employment and Support Allowance

  • Income Support

  • Housing Benefits

  • Council Tax Support

  • Pension Credit

  • Working Tax Credit

  • Child Tax Credit

When you receive money in savings or another form of inheritance, you will need to let the Department for Work and Pensions know. If you fail to do so, the penalties can include a fine, a prison sentence and a ban from receiving benefits for up to three years. You could also be asked to repay any overpaid benefits.

Potential consequences of receiving a sizeable inheritance

What is considered a large inheritance in the UK will vary for different people. One benchmark for a large estate is anything above £100,000 for a single beneficiary.  

The larger the estate, the more likely it is to be taxed. The tax threshold for inheritance in the UK is £325,000 - anything above this is taxed at 40%. Of course, the majority of estates are well below the threshold and so don’t get taxed at all.

Implications of inheriting property on council tenancy

You can inherit a council tenancy from a partner or close relative that you lived with before they died. Inheriting a council home is also known as succession.

The way a council property is inherited depends on the type of tenancy – whether it is a joint or sole tenancy.

Sole tenancies are registered in one name, while joint tenancies are registered in more than one name.

With joint tenancies, the tenancy always passes on to the other joint tenant(s). Additionally, the person who inherits the tenancy in this way must continue to live there. If you have moved out before the other tenant dies, you must move back in to keep the tenancy. 

When there is only one person’s name on the tenancy, they can typically be passed to another sole tenant.

This is usually:

  • A partner

  • A close family member

It has to be the tenant’s only home.  

Secure vs probationary tenants

You are probably a secure tenant if:

  • Your tenancy started before 15 January 1989

  • You previously had a secure tenancy in a different property with the same housing association 

Secure tenancies are a type of tenancy where the tenant can live for the rest of their life so long as they don’t break the terms of their tenancy - a full definition can be found in Part 4 of the Housing Act 1985. The rights of secure tenants in the Housing Act apply to all tenancies whether or not they were created before the act came into effect.

A probationary tenancy, also known as an introductory tenancy, was brought in by the Housing Act 1996 -they are probationary or trial tenancies whereby a new tenant is offered tenancy by the local authority or housing action trust on the basis they prove they are a good tenant. The powers to create this type of tenancy were put in place to tackle anti-social behaviour in council housing.

Exploring trusts as a solution

In 2007, a woman was prosecuted for failing to declare a large inheritance while continuing to claim benefits.

To avoid your inheritance impacting the benefits you can receive, you may want to consider setting up a trust to pay your benefits into. 

A trust is a legal arrangement where someone (the settlor) puts assets like money or property under the control of someone else (the trustee) to manage for the benefit of someone else (the beneficiary).

Here's how trusts can help with inheritance and benefits:

  1. Setting Up a Trust: When someone expects to inherit assets that could affect their benefits, they can put those assets into a trust instead of owning them directly.

  2. Choosing Trustees: The person setting up the trust picks someone trustworthy to manage the assets according to the rules of the trust.

  3. Beneficiaries: The person who would have received the inheritance becomes the beneficiary of the trust.

  4. Benefit Impact: Putting assets into a trust can stop them from being counted as personal assets for benefit calculations. This can help protect the beneficiary's eligibility for benefits.

  5. Getting Advice: Creating a trust can be complicated, so it's smart to get advice from experts in trusts and benefits law to make sure everything is set up correctly.

  6. Considerations: Trusts can be costly to set up and manage, and benefit rules can change, so it's important to keep things up-to-date and review them regularly.

Transferring property into trust

You can appoint a family member to run your trust as a trustee - this will legally separate you from the money, assets or home you have inherited.

First, you need to establish a trust. This involves drafting a legal document called a trust deed or trust agreement, which outlines the terms and conditions of the trust, including who the beneficiaries are, how the trust assets will be managed, and when and how they will be distributed. It is wise to enlist the help of a solicitor experienced in trusts as you will want to make absolutely sure this is carried out right.

You'll need to appoint a trustee or trustees to manage the trust assets. Trustees have a legal duty to act in the best interests of the beneficiaries and to follow the terms of the trust.

To transfer property into the trust, you'll need to change the legal ownership of the property from your name (or the current owner's name) to the name of the trust. This typically involves executing a deed or other legal documents to transfer title to the trust.

Once the property is transferred into the trust, it's important to update relevant records to reflect the change in ownership. This may include updating property deeds, mortgage documents, insurance policies, and tax records to reflect the trust as the new owner.

Role of trustees in separating beneficiary from ownership 

One of the key characteristics of a trust is that they separate legal ownership and beneficial interest - this means that the trustee becomes the legal owner of a property as far as the law is concerned, however under the law, the trustee has to manage the trust property in your benefit.

Minimising Inheritance Tax Liability

There are several common methods people use to reduce their inheritance tax liability. This will reduce your estate’s tax bill and increase the tax-free sums you’re able to leave to your loved ones.

  • Making gifts – no tax is due on gifts as long as you live for seven years after making them. You can give up to £3,000 worth of gifts annually split between anyone you choose and unlimited sums of £250 to other people that you haven’t used another allowance on. Wedding gifts can be made up to £2.500 to grandchildren and £5,000 to children

  • Donate to charity – donations to UK-based charities are inheritance tax free. If you leave more than 10% of your estate to charity, your tax rate will fall from 40% to 36%

  • Leave to your spouse – your spouse can inherit up to £650,000, your inheritance tax allowance. When they pass away, they can leave this amount to anyone they choose in their will

  • Property allowances – leaving your home to your children or grandchildren in your will increase your tax threshold by £175,000 for the current tax year up to £500,000

  • Lifetime insurance – you can take out an insurance policy against your inheritance tax bill to pay off what you owe. This can be expensive, unless you take out a policy when you’re younger

  • Deed of variation – allows your heirs to alter your will after you have passed away so that some of the inheritance can be given to someone else

Addressing Long term care needs

You can also set up a family member to live in an inherited property until they die; this could save you money on care costs and minimise inheritance tax liabilities.

If you have a disabled family member or cohabitant and you require the accessibility adjustments you’ve installed in the council property to take care of them, you may be allowed to continue living in your council house, rather than having to consider making adjustments to an inherited property and incurring expenses.

Should I apply for council housing or wait for inheritance?

If you’re on a waiting list for a council house, you will likely be aware that there’s no guarantee that you’ll get a home.

So, the question is do you wait to inherit a property? 

Either way there is no guarantee of if or in this case when you’ll inherit, as you can’t know exactly when you are set to inherit unless you have an agreement with someone. 

You should also consider your eligibility for council housing. Councils use a points system to determine if you will be offered housing. 


You’re more likely to be offered a house if you are:

  • Homeless

  • Live in cramped conditions

  • Have a medical condition made worse by your current home

Keeping your benefits after inheriting money can be a complex and rocky path to traverse. Professional advice from our experienced solicitors can help you understand your circumstances.

At Lawhive, our wills, trust, and probate solicitors can help you understand the impact of inheritance in relation to your current tenancy situation and future plans. Contact us today for a free case assessment to find out more.

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