Can the Court of Protection save my means tested benefits after I inherit?

Case number 13528158    [2020] EWCOP 52

This case concerned LMS, a 21 year old with Sotos Syndrome, significant autism and some learning disability.  She lacked the capacity to manage her own finances.

LMS’s grandfather died in January 2018.  His Will left 30% of his estate to LMS when she reached 25.  The value is approximately £170,000. 

Concerned about her benefits, LMS’s mother applied to the Court of Protection to allow the money to be placed into a disabled person’s trust. 

There was concern from the Official Solicitor that putting the money into trust would not protect LMS’s means tested provision because it would be treated as a deprivation of capital.  Under those rules, if somebody gives something away or puts it into a trust with the aim of preserving their means tested provision they can be treated as still owning it. The Court looked at the case law around deprivation.  The preservation of means testing did not have to be the sole purpose for deprivation to apply.  This is a complex area and my colleague, Austin Thornton, has written an article on the subject here.

The arguments from the mother were based on there being other reasons for the setting up of the trust, LMS not understanding the capital rules and so not being able to try to get round them, and that this would not be an act by LMS in any event of the Court of Protection being asked to authorise it.  The Court looked at a Northern Irish decision in the matter of Sarah McCullogh where a variation to Will Trust was allowed to protect means tested benefits.  In that case, which is not binding in England and Wales, the Court felt that the significant operative purpose was to give a better effect to Sarah McCullogh’s intention that her son should benefit from his inheritance.  The Court did not believe that amounted to deprivation. 

The Court authorised the transfer into trust.  The Judge made it clear that the Court of Protection did not have jurisdiction to determine whether LMS would be entitled to means tested benefits and funding but can record the Court’s intention in authorising the deed.  The Judge believed that the significant operative purpose of the deed and the Court’s motive were not to allow LMS to receive means tested benefits but rather to better effect the intention of her grandfather. 

Comment

It is very important to remember that this is a decision made by the Court of Protection in LMS’s best interests and not one that is binding on any benefits authorities.  The Court took the view that it would be in LMS’s best interests for the inheritance she had received from her grandfather to be placed into trust as they believed it gave a chance of her Employment and Support Allowance and care funding being preserved.  There is no guarantee of how the Department for Work and Pensions and the local authority will treat the transfer into trust. 

Interestingly, in the case the Court revisited the choice between trust and deputyship.  Of course, a deputyship would not have given any chance of protecting LMS’s means tested benefits and so the only option that might was a trust.  That is in contrast to a situation where a deputy looks after money somebody has received as a result of an injury.  Those assets being looked after by a deputy would be disregarded for means testing purposes. 

It does seem a little odd that the Court stated its significant operative purpose was not to protect LMS’s means tested benefits when that appears to have been a very significant part of the motivation of bringing the case before the Court of Protection. 

As always in these situations, it is far better to set up an appropriate trust in your Will if any of the people you are intending to benefit might be receiving means tested provision.  For every person who gets in touch wanting to make provision in their Will, I am contacted by several in the difficult situation of being about to receive an inheritance which will affect their means tested benefits.