Mary Hughes, 71, collected a fortune from the British Coal staff pension scheme in the name of her late father, David McAleese.
Hughes, from Newarthill, Lanarkshire, collected the cash after pretending the retired coalminer, who died in 1997, was still alive.
Mr McAleese had moved in with his daughter and her family following the death of his wife Lucinda in 1992.
But after he died, Hughes forged her father’s signature and continued to collect the pension entitlement that is usually reserved for spouses.
She was only snared by officials in February last year following a tip-off and admitted dementia sufferer Mr McAleese had passed away from pneumonia in February, 1997.
The mother-of-three appeared at Hamilton Sheriff Court last month and pled guilty to obtaining £116,885.35 by fraud.
And yesterday, Hughes was warned she would have to sell her home to repay the debt or face the prospect of a prison term.
Prosecutors have applied for an order to seize her house under proceeds of crime laws but she has been given time to sell it to a family member.
Sheriff Ray Small told Hughes: “This is a very large sum of money which you obtained to which you were not entitled. The sentencing guidelines for frauds of this kind are that they should result in a custodial sentence.
“I am not convinced that is in the public interest given your age and your lack of a record and I am not going to do this at the moment.
“I would be more content to see the money paid back.
“If you can come to an arrangement with your family to sell the house then I am more likely to take a lenient view than I would otherwise.
“The Crown wish to seize the house if you don’t come to any arrangement with your family.”
Angry family members of Mr McAleese, who were kept in the dark, hit out at Hughes’s “greed”.
A relative, who did not want to be named, said: “I’m absolutely shocked that Mary would do this. It’s so stupid, so selfish and greedy.
“She doesn’t need the money. She lives in a nice house and is thought of as a respectable old lady in this area.
“We are not a close family but I’ve known her all my life and I’m gobsmacked. I had no idea this was going on.
“This was her father. I can’t believe she would disrespect her own father’s memory by lying about his death.”
Hughes pled guilty to lying to staff from the pension scheme that her father was still alive in order to receive the cash between February, 1997 and January last year. A spokesman for the British Coal pension scheme refused to comment.
Sentence on Hughes was deferred until next month.