Court Of Protection Dismisses Application To Place Inheritance Into Trust

In F and R [2022] EWCOP 49 the Court of Protection was asked to consider whether a sum left to a Protected Party (P) by way of inheritance should be paid to the Protected Party directly, or placed in a trust.

F and R [2022]

Case background

The Protected Party was a male in his 30’s with a severe lifelong disability. There was consensus that he lacked the capacity to make decisions concerning the management of his estate and his parents had recently made a successful application for a deputyship order. A deputyship order is issued by the Court of Protection when an individual lacks capacity and has not executed a power of attorney, provided the prospective deputies give security to the Court (by way of a bond), and agree to act in the Protected Party’s best interests. Deputies usually have limited powers and have to seek the Court of Protection’s permission before taking any significant steps.

The Protected Party was due to receive a considerable sum of money from the estate of his mother’s cousin and the Protected Party’s father was concerned that it would mean that the Protected Party would not receive his means-tested benefits. The Protected Party received roughly £60,000 a year in benefits which were high due to the nature of his health and his needs. They included predominantly means-tested benefits such as disability living allowance, care, and support allowance, and employment support allowance. Upon receipt of the inheritance money, he would no longer be eligible to receive these.

The Will provided that the Protected Party’s inheritance would go straight to him by way of a lump sum. However, the Protected Party’s father proposed instead that it be placed into a disabled person’s trust. A trust is a legal mechanism by which money or property that one party is entitled to the benefit of (the beneficiary) is placed in the legal name of a trustee or trustees, who will manage the money or property on the beneficiary’s behalf.

The Protected Party’s father thought this was the best way forward as he believed it would mean that as the Protected Party had no entitlement to receive the funds, they could not be taken into account when his benefits were assessed, meaning he would still receive his benefits. The Protected Party’s parents were also concerned that because they were providing some of the Protected Party’s care and could not keep it up forever, the benefits he was receiving were not sufficient on their own to provide him with 24-hour care, but if he received those plus the trust monies, they could buy a property for him and use the remaining funds to pay for additional care. He argued that it would have been what the deceased relative had wanted.

Because the Will did not provide for the creation of a trust, a Deed of Variation was prepared, which if agreed upon by all beneficiaries would effectively change the terms of the Will to enable the creation of a trust. However, because the Protected Party lacked capacity, his father needed the Court of Protection’s approval as such an arrangement went beyond the scope of his powers as a deputy.

The Protected Party was represented by the Official Solicitor, who opposed the application. Whilst recognising the benefits of the proposed scheme, the OS believed that there was a high risk that the entire purpose of the scheme would be seen to be a means of preserving benefits and that it might not be accepted by the DWP. Her Honour Judge Hilder agreed with this and commented that the Court of Protection “cannot endorse a proposal whose purpose is to preserve an eligibility for benefits which Parliament has decided does not exist”.

HHJ Hilder was also concerned that the proposed scheme would not be advantageous to the Protected Party because it would mean that a significant proportion of the Protected Party’s estate would be managed without supervision. Funds that the Protected Party legally owns would have to be managed by the deputies under the supervision of the Office of the Public Guardian (OPG) but the OPG would not be able to do this if the monies were all in trust.

This decision is a clear indicator that the Court of Protection will not necessarily approve a financial settlement that is solely designed to try and preserve the Protected Party’s entitlement to benefits. It must usually be shown that there is some other demonstrable benefit to the Protected Party and/or that the original intention was that the gift should be given in this way. HHJ Hilder described the father’s submissions on this as “verbal gymnastics” because the testator had been given legal advice, including the possibility of creating a trust, and that he had chosen not to create one, preferring instead to give the Protected Party a lump sum and have the Protected Party’s parents manage it.