Does holding money in a trust protect that money from counting towards means tested benefits?

Alexandra Knipe, Partner Injury & Medical Claims | June 28, 2016

Upon a disabled person coming into money, either through litigation or from a gift, ensuring a vulnerable beneficiaries benefits are still protected is often a key priority. This is because a sudden influx of money can stop a person’s entitlement to benefits or state support which are means tested.

The law on means testing of benefits is primarily contained in the Care and Support (Charging and Assessment of Resources) Regulations 2014 (CSCAR). If a service users capital is over a certain level then they must contribute to the cost of that care and receive less benefits. However the regulations themselves do not actually provide for a definition of the word ‘capital’. Local authorities have to interpret this using the ordinary meaning of the word. The statutory guidance is equally vague, although it does list ‘trust funds’ as an example of capital. This suggests that local authorities should treat a trust fund as capital.

However, helpfully for beneficiaries, the Income Support (General) Regulations 1987 (ISG) provide some exceptions to what can be classed as ‘notional capital’. Two of those exceptions are discretionary trusts and a trust derived from a payment made in consequence of a personal injury.

What is a Discretionary Trust?

A discretionary trust is where the trustees can make certain decisions about how to use the trust income and sometimes the capital. There is no right to payments. The taxation of the trust is different to the taxation of an individual and specialist advice should be sort.

Great care and professional advice is needed in setting up either type of trust. Not only does the trust need to be set up correctly, but the holders of the assets or money need to be advised as how they should act.

* Disclaimer: The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, express or implied.*

Please note

The information on the Anthony Gold website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. It is provided without any representations or warranties, expressed or implied.