Will my inheritance be included in my IVA?
If you enter an IVA you agree to repay your unsecured debt over five years.
During this time you may find yourself in receipt of an inheritance. This is when you are gifted another person’s money or assets when they pass away.
If you receive an inheritance you will be made aware of exactly how much has been left to you by a solicitor. This could be a percentage of a property or a specific sum of money.
Inheritance can have an impact on your IVA so it’s important to be aware of how this could affect you.
Will inheritance affect my IVA?
If you receive an inheritance, whether an amount of cash or a share of an asset, you will be expected to contribute this to your IVA.
Most IVAs contain a windfall clause that states if you receive any unexpected or unplanned income, such as inheritance, that it should be used to repay your creditors.
The reason for using any unexpected income to repay your lenders is that the IVA is designed to save you from bankruptcy and clear a percentage of your debts. By signing you agree to pay your creditors less per month they would be entitled to and as such should offer any additional money to the arrangement when possible.
How much of my inheritance will I pay into my IVA?
By entering an IVA you agree to repay your debts as best you can over a set period with the remaining debt written off at the end of your arrangement.
However, while you may not be committed to repaying the full balance of the debt owed you are agreeing to repay as much as you can towards it. That means that any inheritance you receive should go towards your arrangement.
If your inheritance can cover the entirety of your IVA debts you’ll be expected to pay this in full as well as cover the cost of any fees associated with the arrangement.
You’ll be able to keep any money you have left over after paying the IVA.
Will I be able to keep any of my inheritance?
While it may not be the first thing on your mind, it’s important to speak with your insolvency practitioner (IP) before spending any of your inheritance.
You can typically keep up to £500 of any inheritance you receive but anything above this must be introduced into the arrangement.
If you are planning to make an emergency purchase, such as a car that will get you to work or home repairs, you may be permitted to keep more of the funds.
You should speak with your IVA provider about any special circumstances as soon as possible.
What happens if I don’t inform my IP about my inheritance?
When you sign your IVA proposal you agree to make your IP aware of any changes in your financial circumstances.
As well as completing an annual income and expenditure check you are expected to keep your IVA provider up to date with any changes to your financial circumstances – good or bad.
Choosing to keep news of your inheritance a secret would be considered a breach of your agreement and your IVA could fail.
What if I receive an inheritance before starting an IVA?
If you receive an inheritance, or any windfall, before entering an IVA, your creditors may request any remaining funds are paid into your agreement.
Creditors might also reject your IVA application if you have spent funds from an inheritance or windfall before entering the arrangement if they feel this money should have been paid towards the debt you owe.
You may choose to pay your creditors as much as you can from a windfall before entering into an IVA as this may work out better for you financially in the long term.
Your experienced debt adviser will be able to advise on the best way to proceed during your application process.
