× Search rightsnet
Search options

Where

Benefit

Jurisdiction

Jurisdiction

From

to

Forum Home  →  Discussion  →  Work capability issues and ESA  →  Thread

Discretionary trust fund and affect on benefits

shalinic
forum member

Islington People's Rights

Send message

Total Posts: 1

Joined: 11 August 2010

I have a client who is on income based ESA support component and DLA higher rate care and mobility.
6-12 months ago when her parents died so she sought advice as to what to do with her inheritance, as she wanted to remain on the benefits she was receiving.  She was advised to set up a Discretionary Trust fund and get her inheritance put directly into it.  This she did.  She informed ESA & housing benefit about the discretionary fund and her ESA entitlement remained unaffected.

The Trustees of the trust fund have recently proposed to use some of the funds to buy a flat outright and allow her to live in it for the rest of her life.  The remaining funds left in the Trust Funds the propose to use for the repairs & upkeep of this property.

She wants to know
a) Whether it is possible for the trustees to do this. 
b) Whether she will be able to live in the Trustees property rent free or should the Trustees charge her rent.  If so, will she be able to get housing benefit to cover the rent.
c) Will the fact that they have used the discretionary fund to house her affect her past and future benefit entitlements

Ruth_T
forum member

Volunteer adviser - Corby Borough Welfare Rights & CAB

Send message

Total Posts: 313

Joined: 21 June 2010

We have a client who was seriously injured in a road traffic accident.    His compensation for personal injury was placed in a discretionary trust fund and the trustees purchased a house for him in which he lives rent-free..  Both the capital and any income he receives from the trust are disregarded for MTBs.

The difference between our client and yours is that your client’s fund does not appear to be derived from PI compensation, and non-PI trusts are treated differently.  You probably need expert advice from someone who specialises in trusts.

shalinic
forum member

Islington People's Rights

Send message

Total Posts: 1

Joined: 11 August 2010

Ruth_T - 24 November 2015 07:52 PM

We have a client who was seriously injured in a road traffic accident.    His compensation for personal injury was placed in a discretionary trust fund and the trustees purchased a house for him in which he lives rent-free..  Both the capital and any income he receives from the trust are disregarded for MTBs.

The difference between our client and yours is that your client’s fund does not appear to be derived from PI compensation, and non-PI trusts are treated differently.  You probably need expert advice from someone who specialises in trusts.

Thanks for your reply it is really helpful. 
However could you clarify what “MTB” stands for?
Do you by any chance know any expert advisers based in London who specialises in trusts and how it can be used without affecting a client’s benefit entitlements?

[ Edited: 25 Nov 2015 at 10:43 am by shalinic ]
Ruth_T
forum member

Volunteer adviser - Corby Borough Welfare Rights & CAB

Send message

Total Posts: 313

Joined: 21 June 2010

MTB = means-tested benefit.

HB Anorak
forum member

Benefits consultant/trainer - hbanorak.co.uk, East London

Send message

Total Posts: 2895

Joined: 12 March 2013

Unless there is more to this than meets the eye, my comments are going to be somewhat discouraging.

First I am surprised DWP allowed ESA(ir) to remain in payment (fingers crossed it doesn’t come back to haunt her).  Arranging for her inheritance to be held in a discretionary trust with the sole intention of preserving means-tested benefit entitlement looks like plumb deprivation of capital to me.  Are you saying this was her choice - she persuaded the executors to pay the money over to trustees instead of to her personally?  Or was it her parents who willed it that way?  That would put a completely different complexion on it.

On the HB question, there is a presumption against paying HB where the claimant is liable to pay rent to trustees and she is a beneficiary of the trust: the onus is on her to show that the arrangement was not created to take advantage of the HB scheme.  I would expect the Council to reject the HB claim under this rule - most people who inherit enough money to buy a house would just do that and not end up having to rent it from someone else.  There is also a problem with the circularity of rent payments: as the sole beneficiary of the trust, any rent she pays to the trustees will add to the funds to which she is beneficially entitled.  I don’t think the Council will like this at all.  I cannot see any obvious reason why she cannot just have a home bought for her with the trust fund and leave it at that.

Looking further ahead, Universal Credit does not allow housing costs in these circumstances at all - there is no escape clause as there is in HB.  So even if the claimant is able to get HB for a few years, there will come a time when she migrates to UC and at that stage the housing costs will not be covered, subject to the fine print in any transitional regulations applying at that time.

As she has ceded control over the capital to the trustees they do not have to follow her instructions and they will use the trust fund for her benefit as they see fit.  But they do need to be aware that charging her rent is unlikely to satisfy HB and definitely won’t satisfy UC.

Claire Hodgson
forum member

PI Team, BHP Law, Durham

Send message

Total Posts: 165

Joined: 17 October 2013

shalinic - 25 November 2015 10:37 AM


Do you by any chance know any expert advisers based in London who specialises in trusts and how it can be used without affecting a client’s benefit entitlements?

that would be a solicitor - preferably the ones who set up the trust