What benefits am I entitled to?
If this is your first visit, check out the community guide. You will have to Join us or Sign in before you can post.
Receiving too many notifications? Adjust your notification settings.

I've been made a trustee of a Discretionary Trust fund

drjuliebdrjulieb Member Posts: 2 Listener
I've been made a trustee of a Discretionary Trust fund with several beneficiaries, one of whom is disabled and the primary beneficiary - X.  Disabled X currently receives housing benefit, DLA and a state pension and has less than 2k in savings.  The trust is intended to pay for luxuries, better care, health, etc at the discretion of the trustees, not day to day things.  I am considering making a Vulnerable Person Election to ring fence most of the trust capital and income for use by X as the tax advantages are considerable, but I can't get a clear idea on whether by doing this it could lose the disabled person their Housing Benefit. It seems to depend on whether they have 'access' to the income and capital. By making a Vulnerable Person Election does this mean payments for the ring fenced part becomes no longer discretionary? Or does it remain discretionary but regarded as X's capital?  I understand that if I don't make the election and savings remain low that X's housing benefit will continue.  Can anyone advise as neither my solicitor nor my accountant can give me a clear answer.

Replies

  • thespicemanthespiceman Member Posts: 6,408 Disability Gamechanger
    Hello @drjulieb   Pleased to meet you welcome. Thank you for joining and for your question.

    I am not sure of an answer to your question. There will be members who will know and also our team.

    All I can add . Hope that helps.

    We are a supportive community. Friendly, care and share.

    Please take care

    @thespiceman
    Community Champion
    SCOPE Volunteer Award Engaging Communities 2019
    Mental Health advice, guidance and information to all members
    Nutrition, Diet, Wellbeing, Addiction.
    Recipes
  • Sam_ScopeSam_Scope Member Posts: 7,732 Disability Gamechanger
    Hi @drjulieb
    I have asked @BenefitsTrainingCo to take a look and see if they can help :)
    Scope
    Senior online community officer
  • mikehughescqmikehughescq Member Posts: 5,415 Disability Gamechanger
    I suspect if your solicitor can't advise on this you need a different one. A VPE as I understand it is done for tax purposes alone and has no impact on the discretionary nature of the trust so should not impact HB. However, this is a matter for a solicitor and not lay people so you should seek proper legal advice from a true specialist in discretionary trusts and act on that and that alone.
  • BenefitsTrainingCoBenefitsTrainingCo Member Posts: 2,692 Pioneering

    What matters here is whether it is a discretionary or a non-discretionary trust. Payments made from a discretionary trust usually count as capital, but income from the trust is generally treated as a voluntary payment and is ignored. The trust asset itself does not normally count as capital because payments are at the discretion of the trustees and the beneficiary cannot demand payment. So as I think you may know, so long as the beneficiary's available capital is below £16,000 they will remain eligible for housing benefit, and if the available capital remains below £6000 there will be no effect on housing benefit at all.

    Payments made from a non-discretionary trust count in full as capital whatever the nature of the payment. The trust asset itself also counts as the beneficiary's capital, because in non-discretionary trust the beneficiary can obtain the asset from the trustee at any time.

    I am not familiar with the term vulnerable person election i'm afraid and unfortunately we will not be able to help you check whether the trust remains a discretionary trust. I would expect the solicitor who helped set up the trust to be able to answer this question though.

    David
    The Benefits Training Co:
    Paul Bradley
    Michael Chambers
    Will Hadwen
    Sarah Hayle
    Maria Solomon
    David Stickland
  • drjuliebdrjulieb Member Posts: 2 Listener
    Thank you everyone.  Part of the problem was that the trust was set up via a DIY will with verbal instructions given to me decades ago and no case notes.  Plus the 'vulnerable person election' seems to be  relatively new thing that HMRC have brought in so there's little case law to base a decision on.   I will go back to my solicitor and see if I can get him to refer to someone more knowledgeable. My default will have to be that I leave things as they are as X does not have the mental faculty to be able to understand this issue but would be totally distraught if the extra help came to an end, so I'm anxious to get this right.  It's good to know there are others here who can suggest a logical next step. If I ever get to the bottom of this I will share what I have found. Best wishes to all.
Sign in or join us to comment.