Discretionary Trust

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    We have a claim from a man (working age) who has recently moved into supported accommodation due to having his legs amputated. He did own his previous property but it has been deemed unsuitable due to his health needs.
    We were originally advised that his previous property was going to be sold, but have now been advised that it has been withdrawn from the market due to the fact that he is no longer the sole owner as it was transferred to a discretionary trust in 2018.
    We have seen the trust document, which states the claimant to be the ‘settlor’, a trustee, and the ‘principal beneficiary’. The other trustee is a relative, and he is also the other beneficiary.

    The trust document basically states that the settlement is irrevocable but that the settlor can remove or appoint trustees at any time. The trust is stated to have been drawn up by another relative who is a solicitor.

    So, at the moment, we are told that the house is no longer going to be sold as the other trustee is not in agreement. Our claimant obviously isn’t going to push for a sale. He isn’t requesting any income from the trust as, so long as we pay HB, his disability benefits cover his needs. Do we have to therefore disregard the property held in trust under Reg 49 unless at some point it is sold and he receives a payout from the trust or the property is let and he receives an income from it. I suspect that even if this were to happen, the rent payments would be put into the trust to accumulate. It just seems wrong that he has the means to provide a home for himself by selling up and buying a more suitable property, but is choosing not to and HB will fund the rent. I don’t think a deprivation argument will stand up as the trust was drawn up in 2018 and we are told he had no knowledge at that point that he would need to claim HB. I suspect the main reason at the time was to avoid future care home fees as his health has been deteriorating for some years. On the surface, it seems to be a sham trust, but I don’t think we’ll get anywhere trying to prove it.

    Any thoughts?



    1: Why is the the other trustee not in agreement to sell the property to fund your claimants costs (now that he needs to)?
    2: Is the argument a valid one?
    3: Is the other trustee only refusing now because HB is an factor / issue? and perhaps he has been suggested to him/her to do so?
    4: And would this be therefore be the issue to base your “sham” around?

    5: What is your claimant doing about this?
    6: Is he perusing it through solicitors / the courts so the property is sold to fund his costs now that the his personal circumstances have changed?

    Mike Hughes

    1 and 2 are essentially none of your business. 3 is idle speculation just as the OP contains speculation as to the motivation for the original trust. None of this pertains to making a decision on the facts at hand.

    I am always fascinated by the default position for the protection of capital being “to avoid future care home fees”. The evidence for this tends to be sketchy at best.

    What you have to address here is the trust as it is now.


    You’re right, it was speculation and is irrelevant other than to suggest a reason for the trust being set up was for some other reason other than to obtain HB. As such, no evidence of deprivation.

    My concern is that the property has been put into a trust where the original owner is the trustee with control, and is also the principal beneficiary, so seems to have effectively remained in the position of owner (beneficial rather than legal) but without any penalty to any benefits. The other trustee doesn’t really have any say, and I don’t think is actually blocking the sale. The claimant didn’t seem to know what he had signed or that he couldn’t just sell the property. All info seems to be coming from relatives, which is understandable given what he’s just gone through.

    My question is: given that he has the means to fund his rent, or even sell to buy more suitable accommodation, but is choosing not to pursue any payment from the trust, do we have to just disregard the capital indefinitely or should we be questioning it? I don’t have any problem with the property being placed in trust, it just seems an unusual set up.

    Mike Hughes

    There are an awful lot of such trusts where one of the trustees is also a beneficiary. Not sure you can draw an inference there to any great purpose in isolation. What is the specific evidence the other trustee has no say and is not blocking a sale? “I don’t think…” again falls into speculation and subjectivity.

    I’m also unconvinced by “… has the means to fund his rent.” If you were a claimant who was a recent amputee I would hazard an educated guess that if you have accommodation then looking at alternatives to that would be absolutely bottom of your list for a long long time. In particular in future you are going to need to fund an increasing number of care needs because of the limitations to your mobility and the many restrictions that imposes just on doing simple things like getting out of the home and travelling to the most basic of events such as medical appointments, shopping, seeing family and friends and just having a life. How, at this point, do you weight what the costs of that will look like? The answer of course is that you don’t. You either make a stupidly uninformed guess or you wait and see what your actual expenditure looks like. I would suggest it would be absolutely reckless and irresponsible of anyone in the position of your claimant to access their capital for a change of accommodation only to find within 12 months that they are living so far beyond their means and with negligible to no capital to access that they would in fact need to move again to a property funded by… you guessed it…

    I’d venture to suggest this scenario is actually exactly that envisaged by the welfare system as an appropriate one for support at a difficult time.


    If this scenario is exactly that envisaged by the welfare system, the capital value would be disregarded by legislation. The fact that the value of an owned property is taken into account for HB and care fees suggests that this is not the expected norm.

    I totally understand the ‘why’ and have every sympathy with those who have strived to own property only to have it taken away when they need care. And, as long as it fits within the law, I have no issue with the action they have taken. When so many people are denied help because they have a £200,000 capital asset, we just wanted to ensure that we are taking the correct action by allowing him full HB and wondered what others’ thoughts were, who may have more knowledge of these things. Thank you for your responses.

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