02.02.16

Ever wanted free advice from a lawyer, well here it is! Over the next 6 months we will be answering your questions on everything to do with planning for your future, raising the issues you are dealing with. If you have a question you would like an answer to, please contact us.

Question:

My father has died leaving money to my daughter, who is disabled and receiving means-tested benefits.  A friend has told me that she will lose her benefits. Is this correct?

Answer:

This question is not unusual and many of our clients have been in similar situations. Means-tested benefits and support are payable to people who can demonstrate that their income and capital fall below a specified threshold.  For example, for Housing Benefit the upper capital limit is £16,000 and the lower capital limit (if under the pension qualifying age) is £6,000.  In the case of Income Support, you need to have capital of less than £16,000 in order to make a claim.

You haven’t said in your question, but if we assume that the money left to your daughter by her Grandfather is worth more than £16,000 then, as the value exceeds the means-tested capital allowance, your daughter’s entitlement will be stopped.  If she has been left less than £16,000 then the amount of means-tested benefits and support she receives may be reduced.

We often get asked if there is anything that can be done with the inheritance to prevent a loss of benefits.  In most cases the answer is no.

When assessing means-tested benefits and support, the relevant provider can look for evidence of deliberate, or intentional, ‘deprivation of capital’.  This refers to a situation where a person has decreased their overall assets in order to meet the means-tested benefits criteria.  Unfortunately giving her inheritance to someone else, placing the inheritance in a trust or using a Deed of Variation – which can enable beneficiaries of a deceased’s estate to alter the distribution of the estate – is not an option to preserve means-tested benefits as this would be deemed a deliberate deprivation.

Hindsight is a wonderful thing; however, your father could have treated his estate in a different way so as not to affect your daughter’s means-tested benefits and support.  This involves the use of a Trust.  Had he set up a Trust in his Will, your daughter’s means-tested benefits could have been unaffected.  With a Discretionary Trust, beneficiaries do not have any fixed entitlement to receive money from the Trust, they only have a potential right to receive a benefit so any Trust monies cannot be taken into account in her assessment for benefits.

Protecting means-tested benefits and support is a key factor to consider when writing a Will and it can be a complicated issue needing specialist advice to protect financial loss to family and friends. It would be a good idea for you to look at the different types of Trusts available when planning for your future, taking into consideration your daughter’s disability.

For more information about the issue highlighted in this Q&A series please contact us.