That could be some considerable overpayment.
Advice from the CAB or other welfare rights advisor would be a very good idea.
You are correct that capital and/or income has no effect on DLA or PIP. So there won’t be any issue over that.
But the overpayment of Income Support is a different thing. The rules are that if you have a change in circumstance including receipt of capital or income, you are required to notify the DWP. As a result of a failure to notify the change, the DWP will classify the overpayment of benefit as having been caused by either claimant error or fraud. If however, she tried to tell the DWP at any point about the money, then it could be reclassified as ‘official’ error.
I’d be inclined to think that it would be possible to classify it as claimant error if it was a simple failure to notify. But, if she has actually completed a claim form in which she omitted to state that she had money in the bank (or what ever form the capital was in), then the DWP are more likely to classify the overpayment as fraud.
If the overpayment is caused by fraud, the DWP may well decide to prosecute, hence the potential for a court case.
If the overpayment was caused by ‘claimant error’ on the other hand, they’d be less likely to prosecute. But they would still expect her to repay the overpayment.
If however, it was caused as a result of the DWP failing to act on her notification of the inheritance (ie official error), there might even be an argument that it shouldn’t be recovered. (Fairly unlikely, but maybe worth a punt, depending on her circumstances and whether she did try to notify them about it.)
So if there’s anyway to get the classification changed to at least claimant error, that would be a first step. And the grounds for this would perhaps be as a result of a mental state, depression, grief, any other factors that could be used to argue that she made a mistake, but did not intend to effectively defraud the DWP. If the overpayment has only just come to light because she has just completed a renewal form for the first time since the inheritance then she clearly at this point didn’t intend to commit fraud, but that she just forgot to tell them and/or didn’t realise it would affect her benefit. If someone has never had any significant savings or capital, it might be possible to argue that she didn’t know it would affect her Income Support.
It’s really a question of finding out in what way the overpayment was caused, what information she’s provided to the DWP, whether she’s tried to tell them before, whether she’s made any deliberate false statements and what efforts she’s now made to put things right.
If she can get the classification changed to claimant error, she should be able to avoid a court case.
And at that point the advisor would be able to liaise with the DWP to work out how she can repay the overpayment.
But it definitely sounds like she needs a good welfare advisor looking at the entire circumstances and being in a position to write letters and/or represent her. Obviously, they will also be able to figure out the amount of the overpayment as well.
I hope this basic information helps.