Hello,

I was wondering if anyone had experience of a similar situation and if so how it turned out!

Father & son. Son has severe mental health problems and receives IS. Father has been putting money into an ISA in his son's name. The purpose of this money was to complement a pension plan that was also in place to ensure his son was catered for when he passes away. The balance of this account reached £21k, so IS stopped.

Father has appealed, appears he is trying to argue that this money is not capital but a 'purpose trust'. CPAG Welfare bens book is a bit vague on this and the case law seems to involve property rather than unsecured savings.

Has anyone had success in this area before??

Also if the appeal fails and IS is stopped, there will be an overpayment. There will also be an overpayment to the local authority in terms of home care that has been provided by them. If money from the ISA is withdrawn to pay these overpayments, which then takes the savings below £16k will the DWP be able to argue deprivation of capital? I am suspecting not as I have looked through various past posts regarding the payment of debts and deprivation.

Any thoughts as always greatly appreciated.

Thanks.

the only thought i currently have is that - quite apart from IS issues - father was rash in any event to have an ISA in the son's name, since (from what you say) it appears likely that son doesn't have capacity ... so what would happen when father does die? perhaps father needs advice from a relevant solicitor on court of protection etc. as well.

Father already has LPA in place, however I see your point, ideally the money should have gone into a discretionary trust or the like.........

Whether there has been deprivation of capital will depend on whether the DWP think that the money was spent with the intention of obtaining benefits. With debt probally not but you can never be 100% sure with the deprivation of capital rule.

Various points.

There has been no deprivation of capital becasue the money in the ISA is still there and is the son's (I assume it is in son's name, since you cannot set up an ISA as part of a trust: if you try, you lose the tax advantages.

What was the son living on, as his father was not suing the IS paid for him to live on?

Does the son know he has this capital? If not there can be no failure to dislcose.

If the father is not an appointee but only an attorney there is no legal duty on him to disclose either.

However, ther has clearly been an overpayment.

Trusts are totally irrelevant here. You can only set up a trust of your own property, not someone else's, and there are no advantages in setting up a trust for yourself. This is not a trust, it is an investment.

Purpose trust are completely out of the window. A purpose trust is one which is set up for a purpose, not for people. They are usually void unless those purposes are charitable, which requires an element of public benefit (see all the arguments about the public schools at present).

PS: in the answer above I assumed that the money going into the ISA was the son's IS, but you can also read the account as being the father's money with the IS being retained by the sone.

In this case the trusts ruels for ISAs do apply, and this could be a trust for the son set up by the father. There is no legal requirment for a trust to be made or even evidenced in writing, unless it is a trust of land, but it must then satisfy what are called the three certainties: intention to crate a legal obligation, so that the father cannot change his mind and use the money for himself; certainty of subject matter (that isn't a problem - it's the money in the ISA); and thirdly certainty of beneficiary - in this case that appars to be simply and solely the son.

The problem with a trust like this where there is no CONTEMPORANEOUS documentary evidence such as a declaration of trust is that you cannot easliy tell what its terms are. If the father ahd taken out this ISA in his own name, and left it to his son by will, ther would be no problem. If he had executed a declaration of trust to say that the money was held on trust for himself during his lifetime, and then for his son on his death, that wouldn't be a problem.

In the absence of a declaration of trust, other than that it is for the son, it is held on a bare trust which means that a beneficiary who is of full age and capacity could insist on having the property transferred to him at once. See if CPAG says anything about what would otherwise be bare trusts for people who are NOT of full age and capacity.

I suppose several of these answers do depend on knowing just how severe the mental incapacitation is. But this still tends to mean taht if the father set up a trust for his son with his own money, the sone quite possibly has to be treated as owning it.

Sorry to get all technical. This is the sort of thing that makes solicitors rich and case law in the Court of Appeal.

"Sorry to get all technical. This is the sort of thing that makes solicitors rich and case law in the Court of Appeal."

very true. and why full legal aid should be available, never mind thinking that people can do it on their own benefits with the possible help of 2 hours with the CAB/a WELF (all due respect to the CAB/WELF's - but you see the point!) ...

Thanks so much for the replies, really useful.

The son has been living on his IS. The money that was paid into the ISA was the father's money, but the account was in the son's name.

There was no documentary evidence of an official trust being set up so I guess he is going to be arguing an 'implied trust'.

Oh the benefit of hindsight!

and in the meantime send dad off to see a probate/trusts person so that, going forward, it's properly set up and minimises this sort of issue...

In that case, it comes down to the so-called presumptions of "advancement" and "resulting trusts". They are rather archaic but still have their uses in trying to sort out the ownership of property in these circumstances..

The latter says that if you put property of your own into the name of another (essentially a nominee account), you do not intend to make them a gift of it. The beneficial interest in the property "results" to you.

However in some cases, such as a parent providing for a child, the reverse is true. It is presumed that a gift was intended if the money can be seen as help with "setting them up in life" (advancement). There is some case law which indicates that this needs to be help with getting a foot on the career ladder (or, historically for women, marriage...let's not go there), and probably does not apply to older childrent who are now managing their advancement very nicely.

However both presumptions are very weak and can easily be rebutted by quite slight evidence - eg that it happened around Christmas or the recipient's birthday or marriage, or that it was made clear to the recipient at the time that this was being done for a good reason and the property was not really theirs. There are problems about reasons which are fraudulent (eg, to evade tax).

Retrospective evidence of the reason fro the transfer can only be used to affirm, not rebut, the presumptions. But I am not sure what presumptions would apply here or even whther (in the 10 years since I was last working in the area of trusts) the case law has changed so that the presumptions are no longer regarded as having any legal standing at all. They were certainly weakening all the time.

What evidence there is here indicates that the father's intention was to provide for the son, after his own death. This may indicate that there is a gift, but not an immediate one. However, as already noted, there is no right to hold an ISA on trust without tax penalties. I think Claire is right and a good equity solicitor is needed to try to get to the bottom of this and then snow DWP with the results, suitably complicated.

Brilliant, again thanks for your input. I certainly will be advising he seeks more specialist legal advice.

Thanks.

trouble is, i can't see a good equity solicitor being prepared to advise on legal help rates ... even assuming they have a contract. essential, though.