Vulnerable People and Inheritance

There have been a number of claims in recent years brought by children who have been disinherited by a parent due to their benefits position. Each and every case is different but the common reasoning behind this would appear to be the testators understanding that giving their life savings to a child on benefits will only result in those savings replacing the child’s benefits.

In some recent cases the Courts have ruled that the child has a successful claim. It has been suggested that this imports forced heirship and makes a mockery of testamentary freedom. However, the Judges comments in such claims have been effectively that such beneficiaries can enjoy the benefit of the legacy, have a short lived spending spree and then go back to receipt of their benefits. What does not seem to have been considered is the complex regulations surrounding entitlement to benefits.

A legacy is treated as “Notional Capital” and only when that drops under the threshold the benefits can be restarted. However, the notional capital does not diminish by the amount spent but the amount of means tested benefit the person would have been entitled to each week. Therefore, if you reinstated your claim early you would not receive any money until the time by which the notional capital would be diminished by the weekly figure.

Therefore consideration needs to be given to this matter by both the testator at the point of making the Will and also any beneficiary who is entitled to a legacy but also in receipt of means tested benefits.

Protecting Disabled or Vulnerable Family Members through your Will

Receiving an inheritance can be problematic for a disabled person or a vulnerable person who is entitled to benefits. This is because money from an inheritance or a gift will normally be counted as an asset for means-tested benefits or services.

For a disabled or vulnerable person who receives benefits and services, this can mean that the opportunity to lead a fuller or more comfortable life makes little difference. The money simply replaces state-funding benefits and services until their fund drops below the excluded capital level, when they go back on to means-tested benefits.

A Vulnerable Beneficiary Trust or Disabled Person’s Trust can be a very good way of ring-fencing the windfall so that means-tested benefits are not affected. This type of Trust allows for a legacy to be put straight into the trust. This ensures that the beneficiary receives real benefit from the legacy and also strengthens the claim that more than the Department for Work and Pensions (DWP) capital limit should be awarded.

A further excellent benefit to this type of Trust is that they also avoid the severe tax regime that now applies to UK trusts. Setting up such trusts should be done before the person receives the money, otherwise there may be problems with the DWP deprivation of capital rules. The money should be given to the trust not the person. There are some further  complex qualification rules as to the nature of the trust, in particular how income and capital are dealt with and this means the Trust deeds need to be carefully drawn up to ensure qualification, or substantial liabilities will result.  This is something that you should discuss with your solicitor in the course of giving instructions.

This type of Trust does open up possibilities for people with disabilities to really benefit from gifts and legacies and it should be given serious consideration before simply bypassing someone of a legacy due to them being in receipt of means tested benefits.

For further information please don’t hesitate to contact Kirsty McNulty in our Wills, Probate, Tax and Trusts department or alternatively call Freephone 0800 975 2643 or send any question through to Forbes Solicitors via our online Contact Form.

Kirsty McNulty

About Kirsty McNulty

Kirsty McNulty is a Solicitor within the Wills, Probate, Tax and Trust department at Forbes Solicitors. Kirsty’s blogs cover her specialisms of drafting wills and trust Wills, Lasting Powers of Attorney, various Trusts such as PI trusts and Asset Protection Trusts, Court of Protection applications and all other areas of private client law. Kirsty specialises in assisting elderly and vulnerable client’s and is a fully accredited member of Solicitors for the Elderly.
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15 responses to Vulnerable People and Inheritance

  1. Robert McKelvie says:

    Thanks Kirsty, that was helpful. I’m wondering if my elderly mother in council housing would qualify as a vulnerable person? She isn’t disabled or mentally ill.

  2. Jane Howard says:

    Hi my brother has Asperger syndrome (56 years old) and lives in sheltered accommodation. He receives PIPs and other benefits. My step dad has just left us all £40 000 each (7 of us ). However,he never got round to organising a trust for my disabled brother.He also suffers from depression and the anxiety this pot of money is causing him is desperate as he is terrified of loosing his benefits. As his sister can I set up a trust for him so he can benefit from this inheritance? Thanks

  3. Sally Hobson says:

    Hi Kirsty,

    Quick question – can a Disabled Persons Trust be used to pay for residental home ‘top-up’ fees or are there stipulations on what the funds can be used for.

    Thanks

  4. Dora Vines says:

    I have M.S and on DLA and ESA , the only other help I get is with my Council Tax, which of these benefits would stop ? Thank you

  5. Nicola fisher says:

    Hi Kirsty.iam in reciept of pip esa andchild tax credit.i am waiting on 56 k inheritance there was no trust set inplace .any advice would be welcome.thankyou

  6. Dominic golding says:

    First off i would like to say thank you for having this page set-up for this issue.
    So Thank you.
    right im in the same boat as most on this page. but the person as passed and was in no sound mind to change will before he passed. If he knew this was happening he would have changed it ASAP. So what i need to know is could the executor of the will set this up ? secondly should i have had a letter saying what was in the will or a hearing or is this just in the movies lol. sry got to laugh or i’ll cry.
    any advice would be truly greatful.

    MANY THANKS DOM.

  7. Anise Adams says:

    Hi Asking for a friend (55years old) who lives in rented accommodation. He receives PIP and other benefits. A family member has just left him £40000.
    He has spinal injury and also suffers from fibromyalgia,depression and anxiety, along with other related conditions . This money is causing him a lot of anxiety as he is terrified of loosing his benefits. I am concerned this will plunge him into a deep depression. Can he set up a trust or some sort of pot for his future so he can benefit from this inheritance? Losing his benefits to live of the inheritance seems so harsh as he would need to reapply once the money was gone. He would like to clear current debts as well.Thanks

  8. Donald Mason says:

    Hi, My friends mother is wanting to leave circa £300k between three of them,
    Two of them work but one is unable to and receives various benefits. She lives on her own and has a small mortgage and No children or dependents.
    If she is left £100k will she have to pay some of the benefits back and will she also lose the benefits she is currently claiming?

  9. Gavin says:

    Hi,
    I am just organising my life assurance nominations and note that two of my relatives I intended leaving a nomination receive disability and other benefits as they are unable to work. If I leave them a nomination I believe its likely their benefits will be stopped and some of their benefit will possibly need to be repaid back and the relative will therefore receive no benefit of this nomination as a gift or legacy. Should I just leave the nominations for their children and then its protected, or is it?

  10. Regina Hayman says:

    Hi Im due to recive £5500 inheritence. I work part time I’m also getting housing benefit wtc and pip. I took in a lodger as I’m so much in debt and trying to pay off debts. The interest on my credit cards are very high. I want to use the inheritance to pay off most of my cards specially the high interest will i still lose my benefits

  11. Terence Y Ashby says:

    Dear Kirsty

    I am setting up my will and I wanted to know when I pass away how to leave money to my daughter who is on benefits as she is disabled. She is 30 yrs old now and requires a person to look after her. She has a bad mental health problem gets little benefits at the moment. But when I pass away i don’t want the sale of my house and giving her money to affect her lifestyle in any way. She has a small child now and I dont want anyone to have problems after I am gone.

  12. Jenny Fox says:

    Hi we are due to inherit a 300 thousand bungalow when my father in law passes away but my husband is disabled and on benefits ,we also have residence of our young granddaughter ,the bungalow has been neglected so needs alot of money spent on it which we don’t have ,what benefits could we stay on please

  13. Lis Barber says:

    I have been left 100k and am due to receive this
    in a couple of months. I am 71, slightly disabled
    ( not on paper )
    rented accommodation, central london( thus
    expensive) housing benefit, partial state pension /tax
    credit, no other income.
    need advice, please….

  14. Mrs jackson says:

    Hi myself and my husband both have ins policies of £100.000 we have 5 autistic children and my husband has 3 older adult sons he has no contact with we are both at present full time carers to the kids on full benefits and when the kuds are older they will proberbly have some benefits disability i mean shoukd we set up wills what kind what would hspoen if either of us died would our benrfits stop id like to think the majority of and ins payout voild go into trust for each child but dont really know where to stsrt

  15. Shirley O Flaherty says:

    I received 100000 5 years ago from my uncle and then 2 years later my dad passed and left me his house which I sold took 2 years and was in Eire so a lot of my uncle s money went on going to Ireland looking after my dad and then going a lot to sell the house in the end I received 60,000 for it and that went very quick as I was so depressed ld lost my mum when I was young and then to loose my dad and 3 uncles.1!aunti and a very close friend like my brother so I went back on drugs it’s all gone I have nothing at all I told them as soon as I received the money I’ve given them bank statements but there not enough I don’t know what to do no one will take it on so I will end up homeless and yet I’ve told them the truth all the way I feel sucidle please somebody help

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