Variation of Deed - as a gift - does it affect tax credits?

[loca]

My father has been left �50k from his mother's will (half the house and savings). He is going to do a 'deed of variation', and gift the money to me, as i am getting married and he is on benefits as he is disabled. I will give have some of the money back to adapt his house so they can continue living there, as it would be too expensive for a bungalow, and the council have never helped with adaptations. However, my partner and i get working tax and child tax credit. Will i have to declare it to them as TRUST income although it is not been left directly to me by my nan, but gifted to me by my dad? Any ideas? I've looked at the credits renewal pack and a Trust income is defined as being 'receiving income from a trust, or settlement of a deceased person's estate. the trustees or administrator will have given you (my dad)a certificate telling what income was paid and The renewal book also says you have to include the gross income on the trust income. I know that we have to tell about any interest over �300 a year, but do i have to declare this money on the form as a trust income? I would be grateful for any advice. Thank you in advance.

[themas]

So far as I know, you don't declare the �50K - that is capital, not income. It is the interest which is earned on the �50K that matters so you won't need to declare it now as you won't be earning any interest until after you receive the capital. Any interest earnt on it before you receive it is nothing to do with you - it is a matter for the executors of the estate to deal with.

I'm not sure whether Tax Credits treat trust income in any different way from other investment income. You could enquire of the tax credits helpline but as this is a somewhat unusual matter you may not be able to rely on what you are told. It might be best to visit the CAB or other local welfare advice agency & ask them to look into it for you.

[Barmaid]

If your father does a Deed of Variation to your nan's Will, the "gift" is not treated as a gift from your father, but is treated as if it came directly from your grandmother. Effectively, the Will is re-written to remove your father and replace him with you.

[themas]

I've looked at this again. Barmaid is right - the money will be a legacy from your grandmother's estate. I assumed from your question that the money was to be put into a Trust, but on re-reading it I am not sure that this is what you intend. There is no reason for it to be in a Trust unless you & your father wish to do that.

As regards Tax Credits, the capital is the amount of the legacy - i.e. its value at the date of death. When you receive it you should also receive any interest which has been earnt on the capital since her death (i.e. while the estate was being wound up). The executors are responsible for paying any income tax due on that interest and will only pass the net (after tax) amount to you. The reference you are quoting from the tax credit booklet is - I think - simply saying that you must treat as your investment income the net amount of interest which the executors pass to you plus any tax the executors will have paid on it (because it is the gross income that is used for tax credits, not the net).

Other than that, you treat as income all the gross (before tax) interest the capital earns after you have received it.

I have looked at the HMRC Tax Credits Manual about investment income. So far as I can see (& it is not at all clear) any income you receive from a trust is treated in exactly the same way as any other investment income.

[bednobs]

it seems unesacarily complicated to me - why dosent your dad just keep the money, come off benefits, pay for his own adaptions and pay for the wedding?
then it wont have to be declared for any of your tax credits at all. The way you word it makes it sound like your dad want you to have the money to protect his benefits, but im sure thats not the case