Benefits & Inheritance/Discretionary Trust

Jim80

A friend of mine receives benefits, this has previously included DLA/PIP (aspergers + mental health) but for whatever reason (not the point here) those have been removed so currently just UC being claimed, believe this is classed as means-tested.

His last remaining parent is very ill and sadly won't be around much longer, and there is a likelyhood of there being an inheritance due of somewhere around 15-20k. His disabilites and his nature suggest this money will not be used well... I have had to help dig him out of money situations in the past. His parent would like me to help manage this money so he can make best use of it when they are no longer here. As it happens, this parent helps to pay his bills due to the loss of DLA, he lives very frugally, so this is something more akin to when things break down as opposed to trips to Disney Land or the like. Just looking into options to help:

1. So far from research, I am aware that if given all the money directly benefits are lost until down to a certain value.

2. I have looked into options for something like a discretionary trust, (possibly the disabled version but not sure with the recent loss of DLA), where as a trustee I can release funds when required without affecting benefits. Parent is getting actual advice on this from a solictior, it is taking some time and there is not much left...  Est £1000+ for setting this up takes a chunk, more if they also run it. With the detail I know, there is a lot of admin behind this, things like Tax etc if I were to run it myself for quite a low amount of money being "trusted".

3. Simple option, parent gives me the money instead to manage. Totally understand that this would be classed as "my money" and everything that goes with tax on interest, and debt etc. This is why I suggested the trust to make things as safe as possible for him.

So... question. Given option 3, its the same concept as the trust but without the admin (and the safety net, that is not the question). What problems could this create. I am not attempting to avoid/hide anything from the benefits, the question is around helping him out without crossing any of those lines. Are there any other options to consider. He would rather reject the inheritance than do something to affect his position (history of a benefits change which caused him huge issues for 3 years including a DRO ...). Did I mention, he is terrrrible with money....

poppy12345

I can't answer your question about the trust but giving you the money to "look after" on behalf of him could lead to all sorts of problems, which could include deprivation of capital for the person you're trying to help because you're trying to "hide" the money. It could also lead to problems if you claim means tested benefits yourself. For these reasons i wouldn't recommend this.

Mojisola

poppy12345 said:

I can't answer your question about the trust but giving you the money to "look after" on behalf of him could lead to all sorts of problems, which could include deprivation of capital for the person you're trying to help because you're trying to "hide" the money. It could also lead to problems if you claim means tested benefits yourself. For these reasons i wouldn't recommend this.

I don't think it could - the person receiving benefits has to deprive themselves - in this case, it's their parent who isn't giving them money because they aren't capable of managing a lump sum.

If the inheritance was given to the friend who then gave it to Jim and continued to receive benefits, that would be deprivation.

Spoonie_Turtle

Re: no 3 There is the issue of who would be the beneficial owner - I don't know how that would play out but could still count as his money anyway because you're looking after it for him.

The thing is, once back below £16000 he could reclaim UC.  So even if option 3 counted as his money and he was no longer entitled to UC, with your help the money wouldn't be frittered away but it also wouldn't take long to get back below the threshold if he's having to live off it.  So maybe putting it into an account for him, but which you control - if that's possible, I don't even know - would be simplest.

If it could go into a trust to be disregarded then that would be best but I don't know anything about that either.

It seems he will need someone to be officially appointed to help him with money once his parent dies - maybe the trust solves that but again, I have no idea.


[Not the point of the post as you said, and I don't want to derail this thread especially as this is the most pressing issue but if he hasn't challenged the decision about PIP or DLA then he probably should.  If you know the situation well enough to be able to post a separate thread about it then we can try to help with that.]

TELLIT01

A trust would seem to be the safest way of protecting both the son and the money, but the parent needs to take legal advice.  By the sound of things that needs to be done soon as there is little that can be done after their death if the will says the inheritance passes direct to the son.

Jim80

Mojisola said:

poppy12345 said:

I can't answer your question about the trust but giving you the money to "look after" on behalf of him could lead to all sorts of problems, which could include deprivation of capital for the person you're trying to help because you're trying to "hide" the money. It could also lead to problems if you claim means tested benefits yourself. For these reasons i wouldn't recommend this.

I don't think it could - the person receiving benefits has to deprive themselves - in this case, it's their parent who isn't giving them money because they aren't capable of managing a lump sum.

If the inheritance was given to the friend who then gave it to Jim and continued to receive benefits, that would be deprivation.

The parent has suggested giving it me directly anyway to buy a car, knowing I would help out my friend over time as and when required. Trying not to murky the waters too much! I am aware of the "deprivation of captial" rule, in option 3 the money would not be in his name and would take some digging and convincing of the person looking to link it. As I said, the intention is not to hide it, just checking on options. The idea of putting it into a trust for over £1000 with the same person looking after it just seems a little OTT for the amount of money being given, granted if there were a house at stake here, it would not even be a consideration.


If it gives background, the paperwork behind even a simple transaction confuses him, bills are sent to the parent house as he is prone to ignore. I think I will be helping there eventually as well. Attempting to work out benefits on a sliding scale will be beyond him and will come my way if that option is selected. I guess he is borderline on the idea of someone who should be able to cope, but just doesn't, things get ignored or bad decisions made. He is aware of this and is happy for me to help him manage this money. The DLA was supposedly for life, but moved to PIP/UC (I did not help with this) and they removed it and a challange was made and declined, maybe this will come up again and I will be asking after that, thanks spoonie_turtle.

I have no immediate worry of requiring benefits but understand this would affect myself if the situation were to come up.

The parent also gets confused and is housebound to an oxygen tank, I have been over what I have found and information is on the way from a solicitor but from what I read there is a lot of gaps from those not STEP registered/trained and most are setup around houses/kids under 18 or those with full DLA/disabled registered.

LocoLoco

OP, have you checked with Mencap?  They deal with learning disability and I don't know if Asperger's would be considered that but they run discretionary trusts that are relatively easy to set up and cheaper than going through a regular solicitor (I paid about £300; it was a few years ago so may have gone up but it was a lot less than the cheapest solicitor's quote I had).  As I say your friend may not meet the criteria with Asperger but it might be worth checking if you haven't already.

Jim80

I did look with Mencap, I am not entirely sure he would qualify but is on the list to ask. The cost is similar £925 as a starter:

From mencap website (I cannot link yet!)

• Set up a standard trust with MTC with an initial amount of £5. The charge for setting up the trust is £465 for 1 settlor, and £475 for 2 settlors, including VAT. There is also a one off charge of £460 for the first settlement into the trust fund. this is charged when the trust is activated.

LocoLoco

Oh, gosh, it has gone up a lot!  I hope you can find some way of dealing with it all, it sounds very difficult to sort out.

Jim80

From a recent update by a solicitor, it looks like the cost of the trust is based upon creating a living trust. If the trust is created upon death, via the will, this creates the legal part of the trust and does not have the same cost outside updating the will to include the correct wording and details. Granted, the friend will not have immediate access to the money until the parent has passed, but for him that is not the point of this so could be the best option. Will update for others once decision has been made.

Thanks for the replies so far.

LocoLoco

Jim80 said:

From a recent update by a solicitor, it looks like the cost of the trust is based upon creating a living trust. If the trust is created upon death, via the will, this creates the legal part of the trust and does not have the same cost outside updating the will to include the correct wording and details. Granted, the friend will not have immediate access to the money until the parent has passed, but for him that is not the point of this so could be the best option. Will update for others once decision has been made.

Thanks for the replies so far.

That sounds a bit more helpful for you, Jim80, I hope you can get it sorted out.  Very nice of you to do this for your friends, they're lucky to have someone willing to look into best options for them, it's all very confusing