Legacy and benefits

[UnclePhilip]

A man with learning disabilities, in an LA funded care setting and receiving benefits, has a well-to-do aunt. His father comes to me with a problem. Aunt dies, leaves a number of legacies, including a very large sum to man. Father informs me that a deed of variation has already been done, but relating to another beneficiary, and solicitor says only one DOV is possible.

Of course, in an ideal world aunt would have set up a will trust so man can benefit but not lose all benefits.

I cannot see a way around this now. Is there a legitimate way of avoiding losing benefit entitlement? The money apparently is sitting in the solicitor's client care account (I assume he's the executor). Deliberate deprivation of assets seems to me to be the stumbling block; as well as the difficulty of time travel back to get advice to aunt....

Any thoughts?

[scrumpyjack]

A man with learning disabilities, in an LA funded care setting and receiving benefits, has a well-to-do aunt. His father comes to me with a problem. Aunt dies, leaves a number of legacies, including a very large sum to man. Father informs me that a deed of variation has already been done, but relating to another beneficiary, and solicitor says only one DOV is possible.

Of course, in an ideal world aunt would have set up a will trust so man can benefit but not lose all benefits.

I cannot see a way around this now. Is there a legitimate way of avoiding losing benefit entitlement? The money apparently is sitting in the solicitor's client care account (I assume he's the executor). Deliberate deprivation of assets seems to me to be the stumbling block; as well as the difficulty of time travel back to get advice to aunt....

Any thoughts?

I understand it is possible to have more than one deed of variation provided each one varies a different part of the Estate. So the man in a care home can do one for his entitlement under the Will, but that does fall foul of the deprivation of assets rule so would not avoid him becoming liable for his own care costs.

[DrFfybes]

I cannot see a way around the Deprivation of Assets issue, no matter what you do.

I do wonder though, should whoever prepared the Will have asked a question about the Beneficiaries, such as whether thay had any Special Needs or issues, and would thus have identified this at the Will writing stage and addressed it?

Paul

[Dod101]

So what's the problem? No further State aid? Rejoice that he can now fund himself independently. A modest hep for the State. State benefits are meant to help those who do not have their own means, never as a universal benefit. His legal guardians or whoever can now chose what care he gets and where. Great. What's with people?

Dod

[monabri]

Why should the taxpayer pay? He's been left a "very large sum". My view is tainted as I know someone who is funded by the taxpayer, never worked a day in his life ( yet he's fit enough to ride his bike 40 miles) and his father left him a large sum which his sister administers for him from a trust fund. I assume he has learning difficulties too (he left his expensive public school education with just one O-level in woodwork) but I think he just suffers from lazybarstewarditis.

[Dod101]

I may add that I am tempted to add a clause to my Will that I do not want any deeds of variation to my Will. It is my Will. There is nothing controversial in it but a deceased's assets are for the deceased to leave as he/she wishes. In the case being considered surely the wishes of the Aunt ought to be paramount. She wanted to help the nephew so that his guardians could chose the best for him. What is the plan for the legacy otherwise? Maybe to donate it to charity?

Dod

[genou]

I may add that I am tempted to add a clause to my Will that I do not want any deeds of variation to my Will. It is my Will.

Possible, but not ( I think ) binding on anyone.

There is nothing controversial in it but a deceased's assets are for the deceased to leave as he/she wishes.

Dod

As I've said before, this is a peculiar English common law view, and not universally shared. But in any case a DoV does not vary your will.

In real life what you have is one or more gifts from your legatees to some other person(s). The gift(s) could be done without a DoV. Would you object to that ?

The only reason to use a DoV is to get the tax benefits it allows, because it creates a fiction for tax purposes that the gift was from you.

As to the OP, I am in the Rejoice! Rejoice! camp. Now the inheritor can get a standard of care much above what he is currently getting, and of his own ( perhaps advised ) choosing.

[DrFfybes]

What is the plan for the legacy otherwise? Maybe to donate it to charity?

Dod

Well in this situation she's effectively donated it to the Local Authority.

What we have is an individual, who through no fault of their own is unable to live a normal life, work and enjoy a quality that would otherwise be available to more able people. Whereas a more able person would benefit from this legacy to improve their standard of living, this recipient will use it to maintain their standard, possible with a slight temporary improvement until it is gone, whereupon they will once again need the assistance of the State.

Wheras if the Will had been written with more knowledge of the impact of the inheritance, the person could have benefitted from it as a supplement to their entitlements, perhaps for the rest of their life.

Paul

[Dod101]

I may add that I am tempted to add a clause to my Will that I do not want any deeds of variation to my Will. It is my Will.

Possible, but not ( I think ) binding on anyone.

There is nothing controversial in it but a deceased's assets are for the deceased to leave as he/she wishes.

Dod

As I've said before, this is a peculiar English common law view, and not universally shared. But in any case a DoV does not vary your will.

In real life what you have is one or more gifts from your legatees to some other person(s). The gift(s) could be done without a DoV. Would you object to that ?

The only reason to use a DoV is to get the tax benefits it allows, because it creates a fiction for tax purposes that the gift was from you.

As to the OP, I am in the Rejoice! Rejoice! camp. Now the inheritor can get a standard of care much above what he is currently getting, and of his own ( perhaps advised ) choosing.

Thanks. I agree that a DoV does not vary my Will. That probably would not work anyway but I was thinking in the context of this thread. If I were to leave a substantial sum for the benefit of a disabled person I would be mightily p****d off if others decided that that was not a good idea. In that case the beneficiary would probably not know the difference and the funds would be diverted where? This particular issue comes down to a matter of trust and it is perfectly possible that the solicitor handling the issue is trying subtly to tell the others so.

Dod

[Dod101]

What is the plan for the legacy otherwise? Maybe to donate it to charity?

Dod

Well in this situation she's effectively donated it to the Local Authority.

What we have is an individual, who through no fault of their own is unable to live a normal life, work and enjoy a quality that would otherwise be available to more able people. Whereas a more able person would benefit from this legacy to improve their standard of living, this recipient will use it to maintain their standard, possible with a slight temporary improvement until it is gone, whereupon they will once again need the assistance of the State.

Wheras if the Will had been written with more knowledge of the impact of the inheritance, the person could have benefitted from it as a supplement to their entitlements, perhaps for the rest of their life.

Paul

That is to my mind nonsensical. It is much better to say that the legacy relieves the Local Authority of a liability. We do not know the full details of the situation because it is none of our business but LA’s are supposed to be there as a final backstop just like care home fees. People should be paying for them themselves if they can afford it to have access to funds anyway. Surely you and the rest of us can see that the State/Local Authorities cannot pay for everything. ( For that read ‘You and I’)

Dod

[genou]

Well in this situation she's effectively donated it to the Local Authority.

... this recipient will use it to maintain their standard, possible with a slight temporary improvement until it is gone, whereupon they will once again need the assistance of the State.

Wheras if the Will had been written with more knowledge of the impact of the inheritance, the person could have benefitted from it as a supplement to their entitlements, perhaps for the rest of their life.

Paul

I'm lost. He has inherited "a very large sum" . I can grasp that he may squander it, but not that there will be "a slight temporary improvement until it is gone" . Is he legally fully capable, i.e no guardian ?

His public benefits are only entitlements whilst he has no funds. I'm thinking the problem is that he is being treated as fully capable when you think that he should not be, and then the funds could see him out if properly managed.

[UnclePhilip]

Well in this situation she's effectively donated it to the Local Authority.

What we have is an individual, who through no fault of their own is unable to live a normal life, work and enjoy a quality that would otherwise be available to more able people. Whereas a more able person would benefit from this legacy to improve their standard of living, this recipient will use it to maintain their standard, possible with a slight temporary improvement until it is gone, whereupon they will once again need the assistance of the State.

Wheras if the Will had been written with more knowledge of the impact of the inheritance, the person could have benefitted from it as a supplement to their entitlements, perhaps for the rest of their life.

Paul

That is to my mind nonsensical. It is much better to say that the legacy relieves the Local Authority of a liability. We do not know the full details of the situation because it is none of our business but LA’s are supposed to be there as a final backstop just like care home fees. People should be paying for them themselves if they can afford it to have access to funds anyway. Surely you and the rest of us can see that the State/Local Authorities cannot pay for everything. ( For that read ‘You and I’)

Dod

My thanks to DrFfybes for confirming my feeling that nothing can really be done at this stage.

Now, this is a finance website, and most people quite legitimately try to so order their affairs as to minimise tax, take advantage of tax avoidance measures, and pass on wealth effectively. The aunt did not set up a discretionary trust, as she quite legitimately could have, and this would have successfully allowed the beneficiary to continue receiving benefits and have a fund for all those lovely things which benefits do not provide for.

The moralising above in this thread would lead to disapproval of such trusts. Really? Now that is nonsense, to me.

In the situation I outlined, it's too late; but I have advised his parents to start exploring trusts now, so that when they die, the silly situation created here won't be repeated.

[Dod101]

That is to my mind nonsensical. It is much better to say that the legacy relieves the Local Authority of a liability. We do not know the full details of the situation because it is none of our business but LA’s are supposed to be there as a final backstop just like care home fees. People should be paying for them themselves if they can afford it to have access to funds anyway. Surely you and the rest of us can see that the State/Local Authorities cannot pay for everything. ( For that read ‘You and I’)

Dod

My thanks to DrFfybes for confirming my feeling that nothing can really be done at this stage.

Now, this is a finance website, and most people quite legitimately try to so order their affairs as to minimise tax, take advantage of tax avoidance measures, and pass on wealth effectively. The aunt did not set up a discretionary trust, as she quite legitimately could have, and this would have successfully allowed the beneficiary to continue receiving benefits and have a fund for all those lovely things which benefits do not provide for.

The moralising above in this thread would lead to disapproval of such trusts. Really? Now that is nonsense, to me.

In the situation I outlined, it's too late; but I have advised his parents to start exploring trusts now, so that when they die, the silly situation created here won't be repeated.

The fact is as you say that the Aunt did not set up a discretionary trust. Personally I would not have disapproved of that. Why on earth would I? So what’s the problem? The fact is that Local Authorities do not have unlimited funds (see Birmingham) and so if the funds are there to pay the fees they should be used for that. Nothing silly about the situation. I expect and hope that if I ever have to go into care in old age that I can pay for it myself. People seem to forget that LA’s and indeed central government can only pay for all the things using other people’s money. We are I hope, not quite a socialist state yet. And in any case, a trust is not costless nor hassle free.

Dod

[ReformedCharacter]

I was curious to know about the effect on benefits for such a beneficiary, according to Mencap:

Unlike many other trusts, wealth left or accumulated in a fully discretionary trust does not affect the beneficiary's eligibility for means-tested benefits or entitlements.

https://www.mencaptrust.org.uk/setting-trust-frequently-asked-questions

RC

[chas49]

Moderator Message:
As this is the Legal Issues (Practical) board, I suggest that the discussion of whether a trust arrangement is moral is off-topic here.

The OP's question was:

Is there a legitimate way of avoiding losing benefit entitlement?

Please stick to discussion of that question as a practical legal issue.

Thanks

(chas49)

[Dod101]

Moderator Message:
As this is the Legal Issues (Practical) board, I suggest that the discussion of whether a trust arrangement is moral is off-topic here.

The OP's question was:

Is there a legitimate way of avoiding losing benefit entitlement?

Please stick to discussion of that question as a practical legal issue.

Thanks

(chas49)

Well the OP seems to have accepted that there is in the circumstances described no way of avoiding losing benefit entitlement. Case closed.

In any case I did not intend to set off on a moral crusade. The fact a number of others have agreed with my view is encouraging. I will say no more.

Dod

[UnclePhilip]

I was curious to know about the effect on benefits for such a beneficiary, according to Mencap:

Unlike many other trusts, wealth left or accumulated in a fully discretionary trust does not affect the beneficiary's eligibility for means-tested benefits or entitlements.

https://www.mencaptrust.org.uk/setting-trust-frequently-asked-questions

RC

Yes, indeed. Having spent the bulk of my working life living and working with adults with learning disabilities, I've had many conversations with families who wish to make provision for their vulnerable family members. Discretionary trusts, properly drawn up, are a godsend for their peace of mind. The profound worry for such a parent about what happens to their relative once they're no longer there, has to be seen to be believed.

In this case it does seem to be too late, water under the bridge. The moral for anyone reading this, is if you know of a family in this situation, ask if they've thought about preservation of benefits with trusts. Indeed, as I wrote, his parents need to get a move on arranging their circumstances....

The extra annoyance here is that the man will lose his legacy benefit (ESA) and, once his capital has been spent, he'll go onto Universal Credit. UC is harsh on such claimants, as all the disability premiums are lost.

[stewamax]

This thread raised the side-issue of whether the 'man with learning disabilities' had cognitive problems from injury, disease or age, or from birth. If any of the former three, and were an LPA extant for him, would the LPA attorney have the legal authority to agree to a DoV on his behalf?
And would this apply also to someone with court-appointed guardianship?

Perhaps CK or another professional might care to comment.

[UnclePhilip]

This thread raised the side-issue of whether the 'man with learning disabilities' had cognitive problems from injury, disease or age, or from birth. If any of the former three, and were an LPA extant for him, would the LPA attorney have the legal authority to agree to a DoV on his behalf?
And would this apply also to someone with court-appointed guardianship?

Perhaps CK or another professional might care to comment.

I would also be interested in this.

In the case here, however, a deed of variation can be effective in estate and tax planning, but it is ineffective for the purposes of avoiding 'deprivation of assets' claims by a local authority. There is a possible legal argument that a disclaimer would avoid this, but as it would result in the bequest falling into the residue, it wouldn't help the man:

https://allanjanes.com/-Gifts-to-Benefi ... Hard-Place

There are, as highlighted by stewamax, interesting questions around capacity. His disability is from birth.

[DrFfybes]

This thread raised the side-issue of whether the 'man with learning disabilities' had cognitive problems from injury, disease or age, or from birth. If any of the former three, and were an LPA extant for him, would the LPA attorney have the legal authority to agree to a DoV on his behalf?
And would this apply also to someone with court-appointed guardianship?

Perhaps CK or another professional might care to comment.

I'm not a professional, however anything done under PoA must be in the best interests of the person being acted for.

Note that this might not be the same as what they would have done had they been able to act themselves - eg moving investments into IHT exempt funds might be what someone on a Care Home with Dementia might have wanted, but an IFA wouldn't allow us to invest in such a Fund from MrsF's mum as their Compliance team said it wasn't for the Mother's benefit.

Paul