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Does a recent Court case change the principle that an inheritance affects means-tested benefits?

20.04.21

In our earlier blog post of 20 June 2019, we explained that a direct inheritance would compromise the means-tested benefits of a recipient.  This is why we advise families of people claiming means-tested benefits to always direct an inheritance into Trust.

In the blog we also explained that if the recipient of the inheritance were to refuse it, give it away or spend it quickly, the Department for Work and Pensions (DWP) could view this as deliberate deprivation of assets. The deliberate deprivation of assets rule stops people giving away capital for the purpose of continuing to claim means-tested benefits.

When deciding whether something is deliberate, the DWP looks at the significant operative purpose of what has been done. If preserving means-tested benefits is not the significant operative purpose then, the refusal of the inheritance, gift of it or spending it quickly, may not equate to deliberate deprivation.

A recent case

Towards the end of 2020 the Court of Protection received an application from the mother of LMS, a 21-year-old with Sotos Syndrome, who had a significant degree of autism and some degree of learning disability (case [2020] EWCOP 52).  It was clear that she lacked capacity to manage her own finances.  LMS was claiming Employment and Support Allowance, which for LMS was a means-tested benefit.  She attended a specialist residential college which was funded by the local authority and the residential component of that funding was also means-tested.

LMS’ grandfather had died in January 2018 leaving 30% of his estate to LMS when she was 25.  The value of this inheritance was approximately £170,000.  The inheritance of this sum at 25 would result in LMS losing all of her means-tested benefits.

LMS’ mother applied to the Court of Protection for permission to put the inheritance into a Disabled Person’s Trust.  The most important factor in making this application was to give effect to the grandfather’s intention.

A side issue to this was preservation of the means-tested benefits.  However, when making the judgement the Court of Protection made it clear that it did not have jurisdiction to determine whether LMS would be entitled to keep the means-tested benefits as an effect of the Court authorising the assets to be put into a Disabled Person’s Trust.

The Court of Protection authorised the transfer of the inheritance into Trust.  In doing so it stated that the significant operative purpose was not to protect LMS’ means-tested benefits, it was to effect the grandfather’s intention.

What does this case tell us?

This case does seem rather unique (particularly when you read all of the facts of the case, which are complex) and we await hearing, if we will hear at all, what happens when LMS reaches 25. When LMS turns 25 the DWP can start investigating whether the Court of Protection authorising the inheritance to be put into Trust constitutes deliberate deprivation.

For now, we continue to advise all of the families that we work with not to rely on this case.  Ensure that the inheritance is directed into a Trust rather than directly to the person in receipt of means-tested benefits.

If someone has died leaving assets directly to a person claiming means-tested benefits, this case does not appear to change the principle that refusing it, giving it away or spending it quickly could constitute deliberate deprivation.

How can we help?

We can assist you in choosing the Trust that’s right for your personal circumstances.

For more information on the types of trusts that may be relevant to your child, please click here.

If you would like to discuss setting up a Trust, applying to the Court of Protection or help with your Benefits our specialist team can help, please contact us for a consultation with a member of our expert team. 

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