I have recently been made aware that a friend of mine has named me as a beneficiary in her will although no payments have been made as of yet as the estate is still being administered.
The bequest is likely to be over £16,000 and I know this will affect my benefits.
I have been advised that you can set up a trust and if so then the capital will be ignored and thus I can continue to get my benefits, is this correct?
A. A trust is a method of having capital held by trustees who are then expected to manage the fund, invest it to increase it’s value, release payments in the form of regular income or one-off capital payments.
There are a number of types of trusts in law.
In relation to benefits, the only type of trust that can be created in which the amount of capital is totally ignored would be a discretionary trust where the capital amount has been paid as a result of compensation for personal injuries.
This would not be applicable in the circumstances that you have described, that is, the capital is as a result of a bequest from a will.
If you were to set up a trust then it will be taken into account for the purposes of means-tested benefits, such as Universal Credit, Income Support, Income Based ESA or Income Based JSA, Housing Benefit and Council Tax support.
This would be the case even if you have no legal control over the trust fund and only had a beneficial interest.
Depending on the type of trust and the terms of the trust, the DWP may class the amount held as capital.
Or if it provides a regular income amount, this would be classed as income and again reduced or eliminate any entitlement to means tested benefits.
Then again, and this is the most likely scenario, if it provides income only, the overall value of the capital held in the trust would still be taken into account and if over £16,000 then benefits would end.
So in essence, only pure discretionary trusts created via a settlement from a personal injury claim is the only current exemption whereby the capital is ignored in full and benefits are unaffected.