Inheritance Trust Protection
The client is disabled and recently inherited approximately £200,000 from their late mother. Their concern is that this inheritance was not protected in a way that preserves their means-tested benefits. They are inquiring whether they can establish a trust to safeguard their inheritance and maintain their eligibility for benefits. The legal matters involved include inheritance, trusts, and benefits. Further details are needed to provide a comprehensive response to the client’s situation.
Questions about this case
These answers have been verified by a lawyer in the LEAP networkHow can I set up a trust to protect my inheritance and maintain my eligibility for means-tested benefits?
To protect your inheritance and maintain eligibility for means-tested benefits, consider setting up a discretionary trust. This type of trust allows trustees to manage and distribute funds without directly impacting your benefit eligibility, as the assets are not considered your personal capital. It's important that the trust is properly structured to ensure compliance with relevant regulations. Engage a solicitor experienced in trust law to draft the trust deed and ensure it meets legal requirements. Regular reviews of the trust's operation can help maintain compliance and adapt to any changes in your circumstances or the law.
What are the specific types of trusts available that can protect an inheritance while preserving benefits?
To protect your inheritance while preserving means-tested benefits, consider establishing a Discretionary Trust or a Disabled Person's Trust. A Discretionary Trust allows trustees to decide how funds are distributed, which can safeguard benefits as the beneficiary doesn't have direct control over the assets. A Disabled Person's Trust specifically caters to individuals with disabilities, offering similar protections with potential tax advantages. These trusts ensure the inheritance is not counted as your personal capital, thus maintaining eligibility for benefits. Each option has specific legal requirements and implications.
Are there any legal implications or tax considerations I should be aware of when creating a trust in this situation?
Creating a trust to protect your inheritance while maintaining eligibility for means-tested benefits involves several legal and tax considerations. Primarily, the trust must be structured as a 'discretionary trust' where the trustees have full discretion over the distribution of income or capital. This can prevent the inheritance from being counted as your personal assets for benefit assessments. However, there are potential tax implications, such as inheritance tax, capital gains tax, or income tax, depending on the trust's structure and how the funds are utilised. Consulting a solicitor specialising in trusts and estates would be prudent to ensure the trust is correctly established and complies with relevant laws and regulations.
How does the process of setting up a trust work, and how long does it typically take?
Setting up a trust involves appointing trustees, drafting a trust deed, and transferring assets into the trust. For your inheritance, a discretionary trust might be suitable as it can help maintain eligibility for means-tested benefits. Typically, engaging a solicitor to draft the trust deed ensures compliance with legal requirements and that your specific needs are met. The process can take anywhere from a few weeks to a couple of months, depending on the complexity of the trust and the availability of all parties involved.
Can placing my inheritance in a trust affect my future eligibility for other types of benefits or financial assistance?
Placing your inheritance into a trust may affect eligibility for some future benefits. A trust designed to protect benefits is typically a discretionary trust or a disabled person’s trust, but it must be structured properly to ensure it does not inadvertently impact your eligibility for means-tested benefits. However, future benefit entitlements can vary based on policy changes and individual circumstances, so it's essential to consult with a solicitor to ensure compliance with current regulations.