Trusts and universal credit

[Nikk_a2]

I'm a trustee of a disabled person's trust. It was setup to 1, enable us to manage the assets and 2 to keep assets out of means testing (mostly for social care package). I've recently seen that universal credit (income based version) says they will consider assets in a discretionary trust as belonging to the individual or consider that income generated, even if not paid out to a beneficiary, is assumed to be unearned income. I'm sure this would result in not receiving any uc for some people. The regulations state that only personal injury trusts are exempt.

Doesn't this partly remove the benefits of creating discretionary trust for disabled people?

Does anyone know if there is an established way of creating a discretionary trust so the assets aren't included in means testing for UC? At the moment I think they are disregarded for social care packages but is the next step to change this like for universal credit?

Any thoughts or knowledge in this area?

Thanks

[Charlyd101]

where have you seen this please? All online sources point to keeping assets out of mean testing?

[Nikk_a2 in reply to Charlyd101]

Link to article I saw, hope it opens. I've written to mencap for their thoughts.

rathbones.com/knowledge-and....

[SpeedyH in reply to Nikk_a2]

I am not an expert, only a carer, but i think this has always been the case. Firstly, for many people the actual trust is a will trust so is not physically set up until death so there is no worry until that time. For trusts that are in existence, even discretionary trusts, if the person receiving UC, social care or anything else means tested, is an identifiable beneficiary of the trust such that it can be argued that the trust is in effect theirs, then the trust is taken into consideration. My understanding is that Discretionary trusts are usually set up with a 'class' of beneficiaries rather than just an identifiable individual so 'all grandchildren of x and their offspring'. A letter of wishes then prescribes how the trust is allocated but this is literally a 'wish' not a legal allocation. This is logical because if you set up a trust with only one named individual, then there is no 'discretion' over where the money goes.

[Nikk_a2]

I've seen others on reddit discussing this and it does seem quite confusing. I've found a decision makers guide for universal credit which says the following which looks better for disabled person's and discretionary trusts. But this doesn't explain the articles saying discretionary trusts assets can be taken into account unless they are only talking about situations where the individual claiming UC created their own discretionary trust to transfer assets into?Example

In the past Beth has received payments from a trust. The trustees have the discretion as to whom they

can make payments to. They are not obliged to make payments to Beth and Beth has no power to

demand payments from the trust. The DM cannot treat Beth as being in receipt of notional income in respect of possible payments from the trust.

[Bluey203]

Hi, I read the decision makers guide and interpreted it the same as you, that a person creating a discretionary trust themselves and transferring assets when claiming UC could be penalised. On further research, as SpeedyH mentions, a person with disabilities included in a discretionary trust should still receive means tested benefits as they are not the only beneficiary. So long as trustees do not give the individual regular payments from a trust which is then counted as income, but instead purchase any required disability related items on behalf of the individual.

Hopefully Mencap can enlighten us all with the facts to put everyone's mind at rest 🤞

[Nikk_a2 in reply to Bluey203]

What's confusing is that I think most of us would consider a discretionary trust means a beneficiary has no right to assets. Its all the choice of trustees so you would always think a discretionary trust is excluded (except where someone receives a regular income).As you say hopefully it just applies to claimant's who've created their own trust and made themselves a beneficiary.

[Eeviee]

hi there. I think there is a real danger in non experts making comments and using terms that have a specific legal meaning which is contrary to the understanding of the non expert. For example there is no such thing as a disabled persons trust as far as I am aware. It is either a bare trust known as a vulnerable persons trust or a discretionary trust in the main

Secondly if a discretionary trust has been set up primarily for the benefit of a disabled or vulnerable person then it should be drafted by a solicitor who knows the specialist law in this area. For example I was advised not to include myself or my spouse as a beneficiary as we were the settlors. It would be clear that the trust was not for our benefit

The moral of the story is that solicitors and other advisors are always touting for business and write articles in these glossy investment magazines implying that there are problems with what we have done and that we need to get advice from them.

Trusts are complex legal arrangements that have complex tax laws attaching to them. I would go back to the solicitor who set up your trust and ask their advice. They should be more in the know than using social media to get to the bottom of what is a very specialist area.

Sorry it this sounds brutal, but every persons situation is different and so has different tax and benefit connotations. Advice cannot be given by anyone unless they know all the information relating to the setting up of the trust, the settlors, the beneficiaries, assets, income and so on and are an expert in trust and trust law.

[Magnavoce in reply to Eeviee]

Spot on.

Get a good legal team to draft the VPT, was the advice we got from Renaissance Legal.

Of course, rules can be changed after the point, but one has to make decisions based upon the best information available now.

In case you has assets to put into a VPT, do this as early as possible.