Trust fund to ring fence benefit entitlement

by **simpsonite** on Mon May 16, 2011 12:45 pm

Hi all,

my client is looking to gift a sum of around £40,000 each to her brother & his wife who is disabled. They are both in receipt of various disability allowances(due to her disability).
I assume this money would be viewed as savings by the benefits office and would result in benefits being withdrawn?

Might setting up a bare trust or a discretionary trust for this sum safeguard any benefits that could be withdrawn?

any thoughts appreciated,

simpsonite

by **tax_schmax** on Mon May 16, 2011 3:59 pm

There are trusts specifically created for what is termed "vulnerable people". Qualifying for certain benefits is akin to a test for eligibility of the advantageous tax treatment such trusts allow, so losing benefits need not be a problem.

I've seen other professionals overlook this before. Seek out professional support from an adviser with experience in this field. Although it is not terrible complex, it is still a specialist field.

by **maths** on Tue May 17, 2011 7:21 pm

Unfortunately this is one of the most complicated areas of tax; not least because the rules are different for each of the taxes ie income tax; CGT; and IHT.

Often the professional costs involved exceed possible benefits.

However, as a very very broad generalisation, discretionary trusts do allow benefits to be made available to beneficiaries without a loss
of means tested State benefits.