Before you even think about the consequences of your IVA, you need to grieve for your much loved Nanna and try to celebrate her life, rather that worry about your debts - which are under control and will not therefore cause you any immediate problems.
Now turning to your inheritance, I am afraid that there is little you can do to avoid the fact that this will have to be declared under the terms of your IVA. I am assuming that your sister knows about your financial difficulties, and will want to help you find the right solution - but you do not need to rush into making family decisions immediately.
Would your sister be prepared to allow you to live in the property rent free until you were able to repay your debts in full. If the full amount is only £16k, this may not take as long as you think - and this could be done within the IVA or outside it if the IVA failed and you decided to enter into a DMP instead.
Could your sister afford to purchase part of your share of your Nanna's property, sufficient for you to repay your debts? If so, this may be a sensible way forward, and you could always treat the money as a loan to be repaid once you get back on your feet again. Either way, you and your sister need to come to some agreement as to what is going to happen to the property, as presumably you cannot both live in it. A rent free period for you, could result in you paying higher payments into the IVA, and therefore perhaps even avoiding the sale of the property to realise your share.
And just one final point to bear in mind. Your Nanna and Grandad, like my Mum and Dad (sadly he is no longer with us, and my Mum is 89 next year) have lived through such tough times in their own lifetimes. My Mum and Dad both served in the Army during the war, as I expect yours did as well. In those days material possessions were not important, family life and survival being the key focus for so many years - to the extent that I think our own generation would find it hard to understand. Although they worked hard to own their property, this was not the be all and end all to them I am sure - their family and homelife would have been far more important, as well as the education and raising of their children. They would probably have lived in a garden shed if they had to, but there would have been tasty meals on the table, and lots of love in the home.
I am sure that your Nanna, much as she was proud about her little palace, would hate to see you suffering financially, when her legacy could help you so much - both to clear the debts and put yourself on a sounder financial footing, especially for the little ones. don't get so bogged down in the emotion of bricks and mortar, and work with your sister and your IP to find a solution that will satisfy everyone - and look to the future with all of those happy memories of that lovely and much loved lady. She would want you to be srong right now, and use her hard earned estate to provide your family with the very best future.
My thoughts are with you at such a difficult time, and please let us know on the forum how you eventually get on.
Regards, Melanie Giles, Insolvency Practitioner
