Discretionary Trust Funds and Deprivation of capital

Gide

Hello

Don't know if its the right forum but posting it in a couple.

I am a named beneficiary of my late mother's will.

I have a child with learning difficulties who will need support later and a discretionary trust fund for vulnerable persons seems appropriate for him.

My family and I are currently in receipt of means- tested benefits (HB/C. Tax/Job Seekers Allowance). I wish to protect these until I find employment, although the HB/C.Tax would likely decrease in relation to income earned.

1. Can I set up a discretionary trust fund for my child without this action being seen as a deliberate deprivation of capital by the benefits office.

2. Must I get a Deed of Variation to add my son as an additional beneficiary ?
Or is it OK to directly set up a trust fund for him as soon as I receive my funds (without the State counting this as deprivation/ notional capital).

Thank you.

nannytone_2

if the money was left to you it is YOUR money and you cant decide to put it in trust for someone else and remain claiming means tested benefits, as you will fall under the deprivation of capital rules. you can not adjust the existing will to make you son a co beneficiary.

rogerblack

nannytone wrote: »

you can not adjust the existing will to make you son a co beneficiary.

You can under probate law, but as you say, this will count as deprivation of capital if you do so.
Any time you do not claim any money you can claim, you're depriving yourself of capital.

suelees1

Yes, I go along with both the above. Ony disregarded in certain situations for instance money in trust from personal injury or clinical negligence.

Gide

Hi
Thank you for the replies so far.

I seem to be getting conflicting opinions from different forums.

For example, I have been told I can 'ringfence' and protect the funds for the sole benefit of my disabled son, but this would involve my personally giving up any claim to these funds by diverting them directly into a trust fund, before any of the money has been paid to me.


This could be done by creating a 'Deed Of Variation' to the original will naming my Son as the beneficiary. Then I can set up a Discretionary trust, the funds of which would be disregarded by the benefits office.


My main objective is to set up a discretionary trust for vulnerable persons for my son as he will have issues later on in life, among which will be problems of independent living. Rather than a deliberate intention to keep or increase means tested benefits, which would fit the deprivation of capital rule.

If its disregarded in personal injury, why can it not be so for trusts for vulnerable persons ?

The implications from the State perspective would suggest there are no honourable or dignified ways to solve this issue.

Thank you

rogerblack

Gide wrote: »

If its disregarded in personal injury, why can it not be so for trusts for vulnerable persons ?

The implications from the State perspective would suggest there are no honourable or dignified ways to solve this issue.

Unfortunately yes.
While you can do many things legally that will change the will, this is all completely and utterly irrelevant.

The only relevance is - were you named as a beneficiary in the will, and would this normally lead to you obtaining capital.
If you were, then if you attempt to reduce your entitlement by a deed of variation, then this is deprivation of capital from a benefits point of view.

Capital is anything you have, or anything you can apply to the courts to get, that you can sell, or that you can sell the interest in selling at a future date.

There are a small number of exclusions - personal injury is one, your home and personal possessions another.

http://www.dwp.gov.uk/docs/dmgch52.pdf This is an explanation of the treatment of capital in ESA. Most other benefits have near-identical, or identical provisions.

And yes, the benefits system is regrettably at times unfair, and does not appear to allow you to do this.
The only way it would be allowable is if the will is setup specifically to place the money in trust, with you having no access to it.
But you can't modify the will to do this if it doesn't say this already.

Gide

Thank you for the replies. A little more confusion. I received the following (abridged) from a lawyer: comments welcome.

You could draw up a Deed of Variation varying your mother's Will so that your share was left on discretionary trust by her.

Alternatively, you could draw up a Deed of Variation varying your mother's Will so that you are deleted as a beneficiary and your share is left on discretionary trust to benefit your disabled child.

The rules as to deliberate depravation of capital are unclear. However, you have a greater chance of success if the trust is set up by a Deed of Variation rather than set up by you personally.


Also, I would consider that the arguments for setting up a discretionary trust for your disabled child is a stronger argument since you can state that one of the purposes of the trust is to manage money because your child will never have sufficient mental capacity to manage their own finances.


It appears that the only reason for setting up the discretionary trust for your own benefit would be to be able to still claim means tested benefits.

If the DWP did decide that this was a deliberate deprivation of capital, you can always appeal the decision to an independent benefits tribunal.


To answer your questions:


1. If you receive your inheritance and then set up a discretionary trust fund, I consider that this would be seen as a deliberate deprivation of capital.

2. The best option would be to vary your mother's Will so that your inheritance passes direct to your disabled child with the Deed of Variation setting up the terms of the discretionary trust. I cannot guarantee that this would not be treated as a deliberate deprivation of capital but there are stronger arguments for saying that it is not.

The only person who needs to agree to the Deed of Variation is you. The other beneficiaries do not need to agree since it doesn't affect their share of the estate.


Decisions about deprivation of capital are down to the discretion of an individual decision maker.

HappyMJ

Gide wrote: »

Thank you for the replies. A little more confusion. I received the following (abridged) from a lawyer: comments welcome.

You could draw up a Deed of Variation varying your mother's Will so that your share was left on discretionary trust by her.

Alternatively, you could draw up a Deed of Variation varying your mother's Will so that you are deleted as a beneficiary and your share is left on discretionary trust to benefit your disabled child.

The rules as to deliberate depravation of capital are unclear. However, you have a greater chance of success if the trust is set up by a Deed of Variation rather than set up by you personally.


Also, I would consider that the arguments for setting up a discretionary trust for your disabled child is a stronger argument since you can state that one of the purposes of the trust is to manage money because your child will never have sufficient mental capacity to manage their own finances.


It appears that the only reason for setting up the discretionary trust for your own benefit would be to be able to still claim means tested benefits.

If the DWP did decide that this was a deliberate deprivation of capital, you can always appeal the decision to an independent benefits tribunal.


To answer your questions:


1. If you receive your inheritance and then set up a discretionary trust fund, I consider that this would be seen as a deliberate deprivation of capital.

2. The best option would be to vary your mother's Will so that your inheritance passes direct to your disabled child with the Deed of Variation setting up the terms of the discretionary trust. I cannot guarantee that this would not be treated as a deliberate deprivation of capital but there are stronger arguments for saying that it is not.

The only person who needs to agree to the Deed of Variation is you. The other beneficiaries do not need to agree since it doesn't affect their share of the estate.


Decisions about deprivation of capital are down to the discretion of an individual decision maker.

And that's why you are getting many varied "opinions" on this. You can only try it and it'll be down to the invididual decision maker at the end of the day. It really is all "may" and "could". There are no fixed rules on deprivation it's all guidelines. The decision maker "may" decide you did and "may" decide you did not. It's a chance you have to take.

However, the advice you have been given is correct which is basically "make sure you don't get the inheritance directly then set up a trust you must make a deed of variation and you MAY still get benefit".

suelees1

They have covered their backs by leaving the decision up to you. It's worded in such a way that they take no responsiblity if the DWP consider deprivation. It is obvious they know nothing about social security law just by the phrase "you can always appeal the decision to an independent benefits tribunal. There are very few solicitors experiened in this type of law. Anyone with knowledge of this area would know claimants appeals are heard by the Tribunal Service (which admittedly is independent). Of course anyone has the right to appeal as they have the right to make a claim but that doesn't mean to say they'd be successful. The Tribunal Service makes decisions based on the law alone, they have no discretion and have no jurisdiction to to look at anything apart from the legislation.

I believe it would be considered as deprivation

Oldernotwiser

One point to consider (and I don't know the answer to this) is whether a discretionary trust fund would stop your child receiving benefits in his/her turn when an adult.

Gide

Thank you for your replies.

I believe that the only way to find out is to go ahead and do it. The main thing for me is to safeguard the livelihood for my child.
He will receive well over half the inheritance into the discretionary fund, and I will retain as proportion for expenses we need to make. And after this, my savings will still exceed the £16k capital stipulated by the DWP.

In effect , I will come off means tested benefits totally but how long this will be for will depend on my employment situation and how long we as a family need to utilise the savings. I certainly do not have the intention of deliberately (and let's face it, unethically) depriving myself of money just to claim benefits. The support of my child in independent or supported living is paramount.

In a worse case scenario, if I have not found my feet in solid employment and capital becomes depelted over time, at least I would hope the decision maker they can't say it was a deliberate and calculated manouevre.