Capital from a property held in a trust

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    We have a claim where a property is being held in a trust for our claimant. The claimant is under 60. The value of the property is in excess of £250,000. The claimant receives some income from the rent, but claims not to own the property. This is backed up by a letter from his solicitor which confirms that the property is being held by the trust for him, but that he is ‘very emphatically not the owner’.

    I believe that we should not class our claimant as owning this capital, partly on the grounds that he could not dispose of it, and the solicitor tells us that even if it was sold the proceeds of the sale would go to the trustees rather than our claimant. However, I have become slightly nervous having read paragraph 30 of schedule 6 of the HB 60+ regs which appears to disregard this type of capital for pensioners. There appears to be no corresponding disregard for those under 60.

    I am getting confused here? – any help would be appreciated.


    Not overly confident on this but still…

    I do not think your claimant is the legal owner but suspect that he is the beneficial owner.

    You really need to see the terms of the trust both in terms of teh circumsances leading to its creation and what happens to the proceeds when (and if) the property is sold.

    The trustees are generally bound to administer the property on behalf of the beneficiary. Just because they sell it does not mean that your claimant ends up with nothing at the end of the sale – the trustees would generally then be bound to manage the proceeds for the benefit of your claimant.

    I suspect that it will fall to be included as capital – even if it could be disregarded under the provisions of Sch.5 which relates to assumed income.

    Kevin D

    In addition to Pete’s post, ask for ALL documentation relating to the alleged trust.

    Not sure if this is of any help, but there is a Court of Appeal case that may be of interest:

    [b:262ce5997c]Burton v New Forest DC (2004) EWCA Civ 1510 [/b:262ce5997c]
    aka [b:262ce5997c]R(H) 7/05[/b:262ce5997c]

    The original Commissioner’s case was CH/0563/2003. If you have difficulty in locating the ORIGINAL Commissioners Decision (i.e. pre Court of Appeal), feel free to pm me with your e-mail addy and I’ll be happy to send it to you.



    I think the relevant paragraph of 60+ Schedule 6 might be para 28 and this is the direct equivalent of para 33 in the working age Regs: the claimant does not own and cannot sell the trust capital, but he does have an asset in the form of his right to receive income. He could sell the income in exchange for a lump sum of capital. That right to sell income is fully disregarded under para 33 of the working age Schedule 6, and is disregarded for tariff income purposes under para 28 of the 60+ version (more on that later).

    As for the income itself in a working age case, my view is that it would not be disregarded, but the reasoning is tortuous. First, para 17 of Schedule 5 provides for income from capital to be disregarded unless the capital itself is disregarded under a few paragraphs of Schedule 6. Interestingly, para 33 isn’t one of them. On the face of it, that suggests that income from para 33 capital is also disregarded – but is there, in practice, any such income? I don’t think there is. The capital asset under para 33 is not the trust property with its tenants, but the value of the claimant’s right to sell the income from it. That right to sell one lot of income does not of itself create an additional income as far as I can tell. The rent income from tenants is not income generated by a right to sell income from tenants – the income from tenants is the income that he has the right to sell in the first place – that right to sell it does not generate any extra income on top of the rent. Right?

    Don’t look at me with that glazed expression.

    So the income he receives from the trust is not income from any capital of his. It is just income. How do the working age Regs treat income from a trust? If the trust funds came from a personal injury award, the income would be ignored under para 14(1) of Schedule 5. But that doesn’t seem to be the case here so there is no particular disregard that applies to the trust income. I would say count it in full.

    Claimants over 60:

    This part of the 60+ Regs has always been mystifying to me: the capital listed in the last few paragraphs, roped off as Part 2 of the Schedule, is “capital disregarded only for the purposes of determining deemed income”. The best sense I can make of this is that such capital is not included in the calculation of tariff income, but if it generates any actual interest or dividend or whatever then that real life income would be taken into account.

    I can only suggest that for claimants over 60 we guess at the policy intention, which must surely be to exclude Part 2 capital from the TI calculation and from the capital limit as well, but to include actual income generated.

    However, as I argue above, I don’t think this particular kind of capital does generate any income. I don’t think [b:5832dbe9b5]any[/b:5832dbe9b5] capital listed in Sched 6 Part 2 generates income. The result is that all income actually generated by capital of any description is fully disregarded in every case for a 60+ claimant. Whether it’s supposed to be that way, who knows?

    Any lawyers out there care to shoot me down? Is “right to receive income” a term of art with a special legal meaning? In particular, when lawyers talk about income received from the “right to receive income”, do they mean the same income that you have the right to receive?

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