My clients are approximately 60 years old and have a daughter with many care needs. The daughter has a normal life expectancy and there for should outlive her parents and thus require a care home when they pass away or before. She currently lives at home. The couple own their home and are wondering if they have an obligation to split the will 3 ways between this daughter and the 2 other daughters. This would mean one third of the estate paying for her care and rapidly decreasing. Or can they leave the estate to the other 2 children meaning the authorities would pick up the payments from day 1. Can you help clarify what they are legally entitled to do to ensure as much of the estate is passed to the family rather than the authorities?

The parents are under no legal obligation to leave their estate to anyone....or they can leave it to virtually anyone.

How they choose to divide their estate is entirely up to them. This is the purpose of a will. By the way, if they don't already know, they should make a will!

By dividing their estate three ways between the daughters, there could cetrtainly be problems for the daughter who needs residential care, if the estate divests and is realised by - for example - selling the property (which is what usually happens in these circs). Then she would have actual capital to the value of her one third share, and would fall foul of the Assessment of Resources Act (Reg 25) if she disposed. (i'm assuming the share would be greater than £22,250)

If the property and estate is similarly "split" but the house not sold, then an argument can be raised that the Authority cannot take account of her one third share at all. This is because the accounting of notional capital by an Authority in these circs has to heed whether the capital is realisable if sold on the open market by a willing seller to a willing buyer (so if daughters 2 and 3 refuse to sell their share, then daughter 1 could not - at least usually - sell her third.)

If daughter 1 remained in the home which she no occupies after mum and dad pass away (or if they go into care), the property is disregarded in full as long as she occupies it.

However, if the property is willed to the remaining two daughters (excluding the other) then she has no assessable capital or notional capital for the Local Authority to account for in any financial assessment.

GRAG and AoR rules are open to interpretation on these matters and a lot of dubious advice can be forthcoming even from the Authority (who after all may benefit from such advice being given in a certain, shall we say, non-committal way).

May I suggest that they consult a solicitor who specialises in wills and trusts - not just your friendly neighbourhood conveyancer who does wills on the side.

The conventional advice in cases like this, so as to have minimal impact on the benefits of the daughter with complex needs, is to set up a discretionary trust. This is a trust in which any individual beneficiary has no right to any specific share of the property which is the subject of the trust, and is paid only at the discretion of the trustess (which must be genuine). There must be at least one other potential beneficiary and commonly all the family go in and can be benefitted from time to time.

Any income or capital actually paid to the daughter will be hers for benefit purposes, but you do not lumber her with the value of any share of the trust fund.

The trust could be income only, ending on the daughter's death (when the capital is shared out among specified beneficiaries), or it can be of both capital and income so that lump sums could be used for her benefit.

Does this sound like a solution?

Hi Ariadne,

In your opinion, could the steps taken to create a discretionary trust be construed as disposal, from the point of view of the notional capital rules? This query does not arise from this particular case, but has always bothered me.

What do you think?

Steve

Only from the point of view of the person setting up the trust, especially if they make themselvese a beneficiary of the trust. That would possibly negate any tax advantages of a lifetime trust anyway and isn't an issue with a trust created by will. The beneficiaries ahve not disposed of anything.

It would be different if there was a post-death variation of a will that left say all the property to children in equal shares, and they then rewrote it themselves after death (this is legally possible and can be done for tax reasons) as they would then be disposing of their interests. Even so, an interest in the income only of a trust is disregarded for benefit purposes.