11.01.23
In previous blogs we explained that receiving an inheritance can compromise the recipient’s means-tested benefits which, in the case of a person with disabilities, could put their future financial security at risk. If the recipient chooses to refuse their inheritance, or give it away or spend it quickly, this will likely be viewed as deliberate deprivation of assets by the Department for Work and Pensions (DWP) and could compromise a claim for means tested benefits.
In our earlier blog on this subject back in 2021 we commented on the case of LMS, a 21 year- old woman in receipt of means-tested benefits who received a significant inheritance from her grandfather. In this complex case, the Court of Protection authorised the transfer of LMS’ inheritance into Trust, thus saving LMS’ eligibility for her means-tested benefits. However, the Court of Protection confirmed that the significant operative purpose of the order to transfer into Trust was to affect LMS’ grandfather’s testamentary intention and not to preserve LMS’ means-tested benefits.
Despite this qualifying statement, the case resulted in optimism from some sectors that there was now a ‘way out’ for people who were going to lose their means-tested benefits. In our blog we urged caution and confirmed that anyone considering leaving money to someone in receipt of means-tested benefits should do so via the setting up of a Trust.
New case law
The issue of deprivation of assets has been brought before the courts again in the case of F and R. (case [2022] EWCOP 49).
R was a man in his 30s with a lifelong disability and was in receipt of means-tested benefits. R was left a share of his cousin’s estate, resulting in an inheritance of between £400,000 and £600,000. R’s father applied to the Court of Protection asking that the inheritance be put into Trust to save R’s means-tested benefits. However, the Court was concerned that the significant operative purpose of re-directing the inheritance into Trust was to preserve means-tested benefits. The judge was presented with little evidence that R’s cousin actually wanted R to inherit via a Trust or that R’s cousins had considered R’s means-tested benefits. This was the key difference to the LMS case. Based on this, the Court decided not to approve moving the inheritance into Trust.
What does this mean?
The case highlights that redirecting an inheritance into Trust will continue to be viewed as deliberate deprivation of assets by the DWP, unless other special circumstance exist. The case of LMS was a red herring; as circumstances existed (the grandfather’s intention before he died) which resulted in approval of the Trust. It is very unlikely that there will be other cases on similar facts.
Our advice remains that if you are considering giving money away (in your lifetime or by your Will) to somebody reliant on means-tested benefits, an appropriately drafted Trust should be used. A Trust is a way of securely leaving assets for the benefit of loved ones in a way that does not compromise means-tested benefits. Receiving a gift or an inheritance should be something to be celebrated, not something to cause worry or concern. We receive too many calls from those distressed following the news that they, or a loved one, has been left an inheritance impacting means-tested benefits; a Trust can avoid this.
How can we help
We can assist you in choosing the Trust that’s right for you in your circumstances, and you can download our free Trust information sheet here.
If you would like to discuss your own Trust or have a question regarding inheritance and means-tested benefits, please get in touch and speak to one of our specialists on 01273 610 611 or email us at [email protected]
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13 Responses to “Recent court case clarifies how an inheritance affects mean tested benefits”
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Stuart Price
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Developing Vulnerability Series
I don’t wish to be rude but please note that an inheritance can “affect” not “effect” means tested benefits.
Thank you for the invaluable help you give to people via your zoom talks.
Thank you for kindly bringing this to our attention, we will amend the post. Kind regards.
It would be interesting to see a summary of any statute, regulation and caselaw relating to disabled persons trusts (DPT). A standard discretionary trust with several beneficiaries does provide full trustee discretion – so unless income is distributed directly to the beneficiary it is difficult to see how means tested benefits could be affected.
However for a DPT the income and capital must at least for the most part be used to solely benefit the disabled person. So how can this NOT affect means tested benefits. Has this been tested in court? or is there statutory provision to exempt such DPT distributions from means tested benefits assessments?
Thank you for your comment, Nick. A DPT is still discretionary (if set up this way) in terms of the Trustees being able to use income and capital when they decide. The beneficiary does not have the right to income or capital so the same means-tested benefits rules apply, as those which do for DTs.
If you would like any assistance, or have any further questions, please do contact our specialist team who will be able to advise further.
Im an adminisraror of ny brothers house and have received the letters of administration.Under intestancy law myself and a sister only entitled. Its a low vaue house of £150. Can i vary the inrestancy rules to benefit my daughters who wish to claim a small share on the grounds that mybrother had promised to help verbally before his death ?
Many thanks for your comment, Teresa. We understand that our expert team have now made contact with you.
Of I set up a bloodline trust for my son in my will, will it affect his benefits
Thank you for your comment, Linda. Some types of Trust impact eligibility for means tested benefits, and some do not. It is very important that you take advice and choose the right type of Trust for your son. A link to more information about the types of Trust that might suit you is here: https://renaissancelegal.co.uk/our-services/trusts/
If you have any further questions please don’t hesitate to contact our specialist team who would be delighted to help.
I’m on uc and limited capability for work , also pip,my late uncle died leaving me in his will. Would a discretionary trust definitely protect my benefits as it wouldn’t last more than a year and would mean filling all the paperwork and medical evidence again. I’m married with children. If not a trust is there another 100% way of continuing how I am. I’ve got to the point where I wish I wasn’t in the will. Many thanks.
Thank you for your enquiry. Generally, if a person has died and you are named in that person’s Will your inheritance will impact your eligibility for means tested benefits. Although it is possible for you to redirect your inheritance into a Trust, this would normally be seen by the DWP as deliberate deprivation of assets. This will all depend on your circumstances and if you would like to speak to one of our experts please get in touch for an initial, no-obligation discussion.
Thank you for your enquiry. Generally, if a person has died and you are named in that person’s Will your inheritance will impact your eligibility for means tested benefits. Although it is possible for you to redirect your inheritance into a Trust, this would normally be seen by the DWP as deliberate deprivation of assets. This will all depend on your circumstances and if you would like to speak to one of our experts please get in touch for an initial, no-obligation discussion.
Sister is in receipt of means tested benefits, no eill , probate completed 10 mths ago , am I right we have 2 yrs to set up a trust for her , she is vunerable , has bipola which affects her managing money responsibility, she has also been taking advantage of regarding her money in the past ,whereby a carer borrowed money from her and was sacked from her job ,also so called friends borrowing money and not paying her back !
How do we go about setting up a trust and how much does it cost
Reading above taking into account the time that has passed will this affect her , regarding means tested benefits
Thank you for your question. Our specialist team will reach out to you separately about this enquiry and your personal circumstances.