Discretionary trusts

Options
starbuck
starbuck Online Community Member Posts: 195 Empowering
in Everyday life
If a disabled person is a trustee in a discretionary trust will any payments out of the trust affect means tested benefits? 
For example, if a person bought a house from the money in the trust would the dwp view this as capital and stop benefits? 
I know it's a very complicated area but wondered if anyone else had any experience of having a discretionary trust or being named in one. 

Comments

  • janer1967
    janer1967 Online Community Member Posts: 21,922 Championing
    Hi welcome to the community I dont know the answer yo your query but will tag in someone who may be able to assist . @poppy123456 can you help 
  • Chloe_Alumni
    Chloe_Alumni Scope alumni Posts: 10,506 Championing
    Hi @starbuck, here is a guide about discretionary trusts for disabled beneficiaries. I hope this is helpful.
    By incorporating a discretionary trust into your Will, protects the means tested benefits of your disabled child or beneficiary under current rules and overcomes these barriers.
    The     trust is a formal legal arrangement whereby trustees hold money on behalf of the beneficiaries, in accordance with the terms of your will.
  • starbuck
    starbuck Online Community Member Posts: 195 Empowering
    Thankyou ?
  • poppy123456
    poppy123456 Online Community Member Posts: 64,463 Championing
    Hi,

    Money in a trust is only protected while it's in the trust. When funds are withdrawn it's no longer protected.
  • starbuck
    starbuck Online Community Member Posts: 195 Empowering
    So you would need to get permission from the dwp to buy a property from a trust?
  • poppy123456
    poppy123456 Online Community Member Posts: 64,463 Championing
    As soon as the money is taken from that trust it will be counted as savings. It's only disregarded if it remains in that trust.
  • starbuck
    starbuck Online Community Member Posts: 195 Empowering
    Ah ok. So purchasing a house would be the same as if the money had been left directly in the will, in that you would need written permission from the dwp that it wouldn't be deprivation of capital?
  • poppy123456
    poppy123456 Online Community Member Posts: 64,463 Championing
    That's correct because once it's released from the trust you will have access to it. If you're claiming for help with rent at the moment then i can't see there being any problems with deprivation of capital but of course i'm not the decision maker and only they can make that decision.
  • starbuck
    starbuck Online Community Member Posts: 195 Empowering
    Thankyou ?
  • poppy123456
    poppy123456 Online Community Member Posts: 64,463 Championing
    You're welcome :)
  • skullcap
    skullcap Posts: 165 Contributor
    starbuck said:
    Ah ok. So purchasing a house would be the same as if the money had been left directly in the will, in that you would need written permission from the dwp that it wouldn't be deprivation of capital?
    As a beneficiary there would be nothing wrong in having the money from the trust and then buying a home for yourself with it. All that has happened is that you have, for a very good reason, decided to secure yourself with a home with the money. It would be different if it was used to buy a second home. The money is still there albeit that it has been converted into property. Fortunately when buying a home to live in that asset is by its nature exempt from the DWP capital rules.

    I would say that protecting the money in a Discretionary Trust is good, but it will not earn very much in the way of interest. Converting it into your principal private residence you will gain as property prices increase and none of that increase is subject to any DWP rule and you will not pay tax on it. It's a win win situation.

    Anybody that has this situation is well advised to use every penny to buy the best, most expensive house they can find
  • starbuck
    starbuck Online Community Member Posts: 195 Empowering
    Thankyou ?

Categories