Diane Vincent
Chartered Legal Executive
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Date Published:08 Dec 2020 Last Updated:02 Aug 2021

Can a beneficiary redirect an inheritance to a trust if on Benefits?

Wills, Trusts & Probate

There has been a recent Court of Protection case relating to a “protected person” who is a young woman of 21 with a learning disability, who is on benefits and whose residential care fees are being paid by the Local Authority.

The young woman’s Grandfather died recently and left her a share of his estate, which she would inherit at the age of 25.

Her Mother holds Power of Attorney and applied to the Court to have this inheritance placed in a Disabled Person’s Trust but the Official Solicitor opposed the application.

This was principally on the grounds that the young woman could be seen to be deemed as deliberately depriving herself of the assets for the purpose of securing her benefits. Any decision that the Court made on her behalf would be attributed to her and the capital taken into account for means-testing. They also argued that if the funds were in the Trust, this would be managed by the Trustees who were not bound to apply the best interests principles of the Mental Capacity Act 2005.

The Court decided that, in this case, the entitlement to means-tested benefits was not a ‘significant operative purpose’ for the Trust, as the proposals by her Attorney were being done simply to act in accordance with the late Grandfather’s last wishes who intended his Grand-daughter to benefit financially from her inheritance.

The Court approved the settlement but particular note should be made that the relevant Local Authority and Benefits Agency would not be bound by this decision and would be free to contest its conclusion (Re LMS, 2020 EWCOP 52). This means, were they to do so, the beneficiary might still be treated as having access to additional funds and her benefits affected accordingly.

If you require assistance regarding Court of Protection or Power of Attorney advice, please contact our Chartered Legal Executive, Diane Vincent, or Partner & Solicitor, Carla Brown from our Wills, Trusts and Probate department.