I need guidance and supervision? my understanding of discretionary trust funds are that they are to be disregarded as capital for Income Support (General regs) reg 51(2)(a); Housing Benefit(General regs)eg 43(2)(a) and Council Tax Benefit (general regs) reg 34(2)(a).

But i can't find an equivalent for Pension Credit specifically and the pension service are treating one of our clients who is one of the beneficiaries of one as having X amount of capital and not disregarding it.

anythoughts or better still helpful regs

andy

I think that para 28(b) Sched V State Pension Credit Regs provides that the value of a discretionary trust is disregarded for the purposes of calculating tariff income but the regulation doesn't make that much sense to me.

In a discretionary trust, the trustee has absolute discretion as to whether or not to make any payments at all and the "beneficiaries" may never actually benefit. They can not enforce the trust.

Therefore, generally speaking, the value of the "right" to receive payments under a discretionary trust will always be nil as any potential beneficiary under the trust does not have any rights to income.

Not quite there, Ian. Sch V Para 28 in general makes it MANDATORY to disregard PROPERTY held in trust for DEEMED (ie notional) income purposes, EXCEPT where sub-paras (a) or (b) apply. I doubt very much whether either exception applies to Andy's case. Sub-para (a) is for property held under a charitable trust. In particular, (b) is for deemed income from property bought with para 16 money (ie a personal injury pay-out) and put into a trust. In both exceptions, where payments fall to be made or could be made to the beneficiary out of the trust, the PROPERTY can't be disregarded. The wording of para 28 is syntactically odd, which is probably why it was hard to make sense of !

What DWP might be doing is following the ambiguous wording of DMG para 84493, which paraphrases para 28. It starts well enough by saying that property held in a discretionary trust is disregarded indefinitely, but then lists the two exceptions by saying:

"This does not apply to any property held under a charitable trust set up under certain legislation (OK so far). Nor does it apply to any payment made as a result of a personal injury which is placed in trust (Er ...)."

That final sentence has, perhaps, been read in isolation by DWP to mean that all capital from a charity or a personal injury pay-out is to be taken into account no matter what. But, it's only if the capital is in the form of a property that the exceptions apply !

Jim

Ok. The reg still doesn't make sense but I accept that it is not relevant.

However, I don't think its likely to make that much difference as the equitable interest in a discretionary trust will still be of negligible value.

Quite so re relevance to Andy's case, but the reg is correctly drafted in legal terms (not that I'm a lawyer - just long in the tooth). Remember that each para in the Schedule is not a complete grammatical sentence in itself - it's just part of a list of items to be disregarded. In para 28, the item to be disregarded is finally described in the last two words of the para - "that property". All the words before that are qualifying conditions for when you can disregard or not disregard "that property".

Better drafting would certainly be to start off with something like "Any property held under a trust, other than - etc, etc."

Jim

Hi Ian and Jim, thanks for your postings (we lack resources like social security legislation books etc etc)and all the research and deciphering you've obviously done, really appreciated.

You've done wonders for my sanity and confirmed what i knew but couldn't articulate by quoting the relevant regs for PC.

I shouldn't have given you some back ground about the client so here goes!

We received a referral from a local day care centre for one of their clients suggesting she had been visited by the local fraud squad (summer 2005) because she had excess savings ie £70 000 etc etc from autumn 2004, at that time she was IS,HB,CTB (as well as life time award of DLA - very severe physical health issues)and then turned 60 and went on to PC spring 2005).

Anyway interviewed her and to cut a long story short she showed me a copy of a statement she had signed saying she had £70,000 in savings.

She then told she was a beneficary of a non discretionary trust left to her by her mum and that it amounted to £70 000 and that she had given £50 000 to her sons as that was what her mum wanted etc.

Anyway to cut a very long story short, i wrote to the Trustee and discovered that it was discretionary trust and there were several beneficiaries and she had received £4000 in total for essential household items, (basically she also had severe mental health issues and was highly suggestible and was prone to grandiose ideation).

To cut another long story short sent a submission (quoting all the regs for IS,HB,CTB but not PC - THAT TEACH ME) in along with all the evidence etc etc eg letters from trustees in reply to my letters asking a string of questions spelling out it's a discretionary trust and details of any monies she had received etc) and well you can guess the rest.

Anyway the original idea was that the DM would look at the evidence and make the right decision in her favour, but alas, still just have to do the obvious and make sure she gets her bit of social justice.

see ya andy

Good luck, mate!

Jim

Thanks Jim, i have a feeling she'll need it.

My reading of para’ 28 is of disregarding of certain trust capital only for the purpose of calculating any tariff income.

Reg’ 51(2)(a) of the IS reg’s prevents capital in a discretionary trust from being treated as notional capital.

Reg’ 21 of the PC reg’s contains no such corresponding provision. So presumably, the only issue for capital in a discretionary trust (for PC) is whether there has been a deprivation and whether there was a significant operative purpose to gain or increase entitlement to benefit by placing the capital in trust. If this not proved then capital in such a trust is neither actual or notional.

I presume that the reason why this provision has been omitted from reg’ 21 is because of reg’ 51(2) of the IS reg’s which says that any capital available to the client on application shall be treated as notional capital if the claimant fails to apply for it. A discretionary trust is one of a list of exceptions.

Because there is no corresponding provision in the PC reg’s ‘forcing’ people to apply for capital available on application then there is no need for a list of exclusions and thus no need for an overt mention of discretionary trusts.

Thanks Nevdip, i have mumbled on to the Pension Service to try and head off an appeal but they appear determined to treat it as capital and claw money back. If i sound weary it's because i'm fed up with how this case has been conducted from start to finish. However, will have another mumble at customer services and fax them an argument and a copy of the relevant regs for IS and PC for their delectation just on the off chance.

see ya andy