Benefits and Inheritance

HillStreetBlues

kaMelo said:

There was this case, although very specific circumstances.
https://www.courtofprotectionhub.uk/cases/lms-re-settlement-of-property-into-a-trust-2020-ewcop-52

I believe the very specific circumstance was that the testator did raise with the issue of IRB with their solicitor, so it was deemed that the testator did want it protected, but how the solicitor drafted the will failed to take that into account, so unlike the later decision in FvR it wasn't classed as after the fact as there had been an intention.

As it does seem a fine line between the two cases, I expect in the course of time a higher court with get to deliver a verdict.

DE_612183

kaMelo said:

DE_612183 said:

kaMelo said:

DE_612183 said:

What would happen if the person receiving the payment, t hen paid it all into a pension?

Do they earn enough to do that?

My understanding was that you could pay as much as you like into a pension - the limits only apply to the amount that you get tax relief on.

So for example - if you don't have any job and are on benefits you pay in say £20,000

£2880 you get tax relief on the other £17120  you dont.

Whilst that is true in an absolute sense, there are limits for tax purposes and making personal contributions into a pension scheme when they don't attract tax relief on the way in is a bad idea because, bar the TFLS, they are taxable on the way out.
I note you don't mention how much the inheritance is but if significant enough then there is also the annual allowance of £60,000. Contributions in excess of this amount are taxable on the way in as well as on the way out, to exceed the annual allowance deliberately is an absolutely terrible idea.

As executor your remit is to distribute the estate to the beneficiaries in a timely manner. Actively trying to find  ways to do this whilst circumventing rules around means tested benefits is stretching your remit to the limit if not beyond.
Maybe it's a stupid question but I'll ask it anyway, what is so bad about someone who has received an inheritance supporting themselves from that inheritance?.

HillStreetBlues said:

There is case law on this issue I will try to find it at some point.
A disabled person was left a sum of money in an inheritance, but neither a Disabled or Discretionary Trust was set up.
The executor wanted to set up a Trust for the money so the benefactor kept their income related benefits,
It went to the Upper Tribunal and it was found a Trust couldn't be set up after the fact.

If there was a way to avoid an inheritance affecting IRB then there would be some form of Case law, and it would be pointed to in cases such as this.
The fact there isn't points to the fact there isn't isn't a way round it after the fact.

EDIT Case Law
https://www.bailii.org/ew/cases/EWCOP/2022/49.html
It was Court of Protection, not Upper Tribunal that I stated above.

There was this case, although very specific circumstances.
https://www.courtofprotectionhub.uk/cases/lms-re-settlement-of-property-into-a-trust-2020-ewcop-52

The question was raised by the benefactor - I said I did not think it was at all possible ( as you shouldn't claim benefits if you don't need them ), but said I would look into it.

I've suggested the benefactor invest some of the money into a pension as future proof.

The inheritance would be around the £60k mark - but obviously they would not invest all of that - some will pay off debt etc.