If you get an inheritance during an IVA you may not be able to keep these funds. The money will first be used to pay off your debt.
Included in this article:
- What happens if you get inheritance during an IVA?
- Can you keep any of the money?
- Will your IVA be paid off early?
- Should you delay starting an IVA?
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What happens if you get inheritance during an IVA?
Inheritance is categorised as a windfall. If you receive a windfall payment while you are in an IVA this must be paid into the Arrangement for the benefit of your creditors.
As a result your creditors will receive more overall and have to write off less of your debts. You will still have to continue with your agreed monthly payments.
You cannot hide the fact that you will receive inheritance from your IVA company. The solicitor dealing with the estate is legally obliged to inform your Insolvency Practitioner.
Struggling to get your head round all of this? We can help. Call us (0800 077 6180) or complete the form below. The advice is free and confidential.
Can you keep any of the inheritance money?
One of the most common questions about an inheritance payment received during an IVA is whether you will be able to keep any of the money to help pay for urgent expenditures.
The rules say you should pay all the inheritance money you receive into the Arrangement. However your insolvency practitioner does have the discretion to allow you to keep some of the money. This could be if they feel you have a reasonable requirement.
You might really need some cash to repair your car or perhaps your boiler at home. It is possible that your IP will allow you to retain the necessary cash to pay for this. However this is by no means certain and will depend on the individual circumstances surrounding your situation.
You must not spend any of your inheritance money before getting agreement with your IP. This could lead to the failure of your IVA.
Will your IVA be paid off early if you get inheritance?
Normally when inheritance money is paid into an IVA the agreement is not paid off any faster. You will have to keep on making your regular payments until the end of the Arrangement.
The extra inheritance money will simply increase the amount that is paid back towards your debts overall. The amount written off is reduced.
The only time your IVA would be completed early is if the amount received is very large. There would have to be sufficient to pay off the total of your original debt (less the payments you already made) plus the insolvency practitioners fees plus interest charged at 8% pa on the debt from the start date of the Arrangement.
In these circumstances the Arrangement would then come to an end immediately and there would be no requirement for you to continue making your monthly payments.
Should you delay starting an IVA if I know I will get inheritance?
If you receive an inheritance payment before you start an IVA it will be yours to keep and you can do what you want with the money. As such, you can use some or all of it to pay for pressing expenditures if you wish.
The one thing you must not do if you are still planning to start an IVA is pay off any of your creditors (especially friends and family). This would be considered a preferential payment and could mean your remaining creditors reject the IVA proposal.
If you think you will inherit some money but are not exactly sure when, you might want to delay starting an IVA. However you will still be under pressure from your creditors. In this situation you could use a Debt Management Plan (DMP) to manage your debts temporarily while you wait for the inheritance payment.
Received inheritance during your IVA and need help? Call us (0800 077 6180) or complete the form below. The advice is free and confidential.
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Hi, My sister is doing whatever she can to hinder settlement of our late father’s estate. He died intestate 4 years ago. I have just found out she is on the insolvency register and has been since 2013.
Our father died in 2016, can she still inherit her portion of the inheritance? I believe this is why she is hindering things every step of the way. Your help would be very much appreciated
Hi Pat
I assume your sister is registered on the insolvency register as being in an IVA? If this is the case then she has a legal duty to inform her IVA company of her potential inheritance. It would be classed as a windfall and her share of any money would have to be paid to them.
She may be trying to delay things with the false impression that if she waits until her IVA is completed she would then be able to keep the money. However this is not the case. Because the death of your father happened while she was in an IVA any subsequent inheritance will still have to be paid to the IVA company whether the IVA is completed by that time or not.
Any solicitor involved with the probate has a legal duty to check these things before releasing funds to her. As such it will come out one way or another anyway. As such there is no point in her trying to hinder the proceedings on this basis.
I may be due an inheritance which I need to pay into my Iva, my family do not know I am on an Iva, would I be able to pay the Iva without them knowing I have one? Would a solicitor tell my family ?
Hi Laura
There should be no reason why you need to let your family know about your IVA in these circumstances. However they might find out if one of your family is an executor.
The solicitor dealing with the Will and probate may search the insolvency register before paying you your share (as they should) and then discover you are in an IVA. If they do they should only discuss it with you. However there is a risk that they will discuss the information with other family members if they are close.
Given this if I were you I would approach the solicitor yourself and explain the sensitive nature of the situation. You should expressly require them not to discuss your affairs with other members of your family. I would hope that they would honour your wishes.
Hello,
I am 18 months into an IVA, If I receive inheritance it is likely to cover all debt within it (easy and clear). But what isn’t clear is what if I inherit enough to pay towards debts leaving only a small outstanding debt? Would I still have to pay the full contribution for another 3.5years ? That would be over and above the debt?
Hi Rachel
If you receive an inheritance which is not sufficient to cover all of your debt, then you will still probably have to continue making your monthly payments until the end of the IVA however long that takes. This is the case even if it means you end up paying more than you originally owed.
This is because in an IVA if it is possible due to you receiving windfalls like inheritance or increased payments, you agree to pay not only the total debt you owe but also the IVA company fees and interest on the original debt of 8% pa for the length of the IVA. This could add up to considerably more than the original debt.
These cases are rare (because relatively few people inherit large lump sums during their IVAs) but it is possible.