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Thread: pension payment in trust

  1. #1
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    pension payment in trust

    Hi, You kindly helped me some time ago and I wonder if you can help again please. I am on ESA because of disability and in the support group because I'm too ill to work. My brother died and my mother and father are to receive insurance and pension money. My mother's solicitor has suggested that a portion of their money could be put in trust to me without affecting my ESA because the money was never mine. Do you think she is right? Even if she is right, I can't see how I can draw from the trust with affecting my benefit. One thought I had is that the terms of the trust might be that I can spend the money on house maintenance or other essentials that I might find it difficult to afford. Any help would be most welcome.

  2. #2
    Senior Member nukecad's Avatar
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    It is quite possible for a discretionary trust fund to be set up that will not affect your Income Related benefits.

    It is usually done with personal injury compensation, or as the terms of a will, but can be done at anytime.

    It has to be done carefully to avoid the trust affecting income related benefits, you definitely need a solicitor to set up the trust and probably to help manage it as a trustee.

    PS. I thought that your had already inherited a sum of money which had already stopped your IR benefits?
    (As well as your brothers house which was disregarded as your main dwelling).
    Has that not been sorted out yet? Or have you already spent that inheritance?

    The main question for income related benefits is if you have any choice of what happens to any money.
    1. If a trust is set up as part of a will then you have no choice what happens to the money, it goes in the trust and entitlement to IR benefits is not affected.
      As your brother didn't leave a will then that doesn't apply here.
    2. If you get money and then put it in a trust yourself then that is a choice that you have made.
      The DWP would look at that as it being a choice you have made so as to be able to keep claiming IR benefits - which is not allowed.
    3. If your parents set up a trust for you using their money then you claiming income related benefits would still be allowed. That's because you have no choice in what your parents do with their money.

    You also don't/won't have any choice in how the money in the trust is spent.
    That is entirely up to the trustees (usually one or both parents plus a solicitor); acting in your best interests of course.
    They could release sums as and when needed, or even give a regular income from the trust. Neither of which would affect your benefits.

    That is how/why a discretionary trust (that was set up for you) does not affect your entitlement to income related benefits, you have no overall control of how the trust money is spent and can only ask the trustees to spend it in a certain way.

    In legal terms money held in a discretionary trust does not affect benefits because it does not 'belong' to you, it is a fund to be used at the trustees discretion as/when needed to make your life easier.
    You cannot access it directly, only the trustees can.

    Any money/savings/income that you have outside of the trust (or anything that you put in the trust yourself) will still affect IR benefits in the normal way.

    This gives some more information about discretionary trust funds and how they work:
    https://www.anthonygold.co.uk/latest...e-individuals/
    Last edited by nukecad; 11-01-21 at 16:56.
    I don't know everything. - But I'm good at searching for, and finding, stuff.

    Migration from ESA to Universal Credit- Click here for information.

  3. #3
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    Thank you again Nukecad, that puts my mind at rest. In answer to your query about the house and pension, I was satisfied to receive only the small amount of pension being paid to me at the provider's discretion. The rest to be shared between my parents and sister as I am not included as a beneficiary. However, your advice allows me to inherit some of that OK. I am still unsure about how to inherit the house as the solicitor keeps changing her mind about things and my trust in her company being trustees is diminishing by the day. It's always suggested you take legal advice but Mum has had to check everything our solicitor says because she obviously has so little knowledge. We would have made massive mistakes if you hadn't helped. We will be forever grateful to you.

  4. #4
    Senior Member nukecad's Avatar
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    It's a pretty complicated area of benefits legislation and if your solicitor is not used to dealing with it then she will be learning as she goes along.

    Solicitors do tend to specialise in particular legal areas, and not to know much more than the rest of us in other areas.
    That's why they often work in group practices, with each partner knowing about different aspects of the law.

    Many solicitors tend to only deal with more affluent people, (who can afford their fees), and so don't know much about how benefits work.
    I don't know everything. - But I'm good at searching for, and finding, stuff.

    Migration from ESA to Universal Credit- Click here for information.

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