When Are Trusts Chosen Over Deputyships?

A recent decision in the Court of Protection will serve as a useful benchmark in situations where a Trust can be created to manage money for a protected party, instead of appointing a deputy.

When a protected party is found to lack capacity to make decisions, unless that person has already – when of sound mind – executed a Power of Attorney, relatives and occasionally close friends may apply to the Court of Protection for assistance in managing their affairs.

In relation to a protected party’s finances, the Court will often issue a deputyship order, entrusting selected individuals with the ability to manage a protected party’s money. However, deputyship orders do tend to be limited in scope and the powers available to deputies are often very limited. Sometimes, it is possible simply to apply for the Court to make specific orders in relation to someone’s finances rather than to appoint a deputy. In such instances, one or more of a protected party’s relatives will normally have to apply to Court for permission to take certain steps in relation to a protected party’s finances. A protected party will often be separately represented, usually by a solicitor appointed by the Official Solicitor – a public body which exists to give voice to protected parties in Court proceedings.

LMS (Re settlement of property into a trust) [2020] EWCOP 52

In LMS (Re settlement of property into a trust), one of the protected party’s parents made an application to Court which was opposed by the protected party’s representatives. The protected party was a young adult in receipt of employment and support allowance. She was also in a residential college for young people with learning disabilities and her accommodation was means-tested. She lacked the capacity to deal with and understand the value of money.

She had been left the sum of £170,000 by her grandfather on condition that it be given to the protected party when she reached the age of 25. The protected party’s mother applied to the Court of Protection for permission to place the monies into Trust for her, following the intentions of the protected party’s late grandfather. The Official Solicitor did not agree with the application because it believed that creating the Trust would be considered to be a “deprivation of capital” (i.e. deliberate giving away of resources) and that this would prevent the protected party from continuing to be eligible for benefits.

The Court did agree that a Trust deed would not be in the protected party’s best interests if it prevented her from claiming benefits. The grandfather’s Will – albeit not drafted in a way that helped overcome the problem with benefits – was created with the protected party’s continuing entitlement to claim means-tested benefits in mind. However, when the protected party’s grandfather could not find out what benefits the protected party received, he instructed the solicitors who prepared his Will to “leave it as it was”, which showed that the grandfather’s motivation was just to ensure the protected party received some money after reaching the age of 25, rather than to avoid losing benefits. Therefore, the Court decided that it was in the protected party’s best interests to put her inheritance money in Trust.

Comment

The Judge might not have made the same decision had the grandfather deliberately set up the Trust in a way that ensured the protected party did not lose her benefits, as it would have been contrary to public policy to allow a Trust to be used simply for this purpose. This provides a useful indicator of when the Court will support the creation of a Trust instead of the appointment of a deputy for property and financial affairs.