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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?


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.

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