Sheila is the proud granny of Josh, who is a lovely, cheerful 21 year old, and she loves to spend time with him. Josh has learning difficulties and is not able to work. He lives in a supported living house with three other young men and has a support package.
Sheila wants to make sure that Josh has money to do the things he loves. He is very keen on bird watching and nature painting. She decides to leave £30,000 to Josh in her Will. She doesn't mention anything to Josh or his parents as she wants it to be a surprise.
Josh's support package is paid for by a combination of the local authority and benefits that he receives. His local authority care package and some of his benefits are means tested. Unfortunately, Sheila's kind gift means that Josh will lose all of his means tested funding. He will be able to claim his Personal Independence Payment but will lose his Universal Credit, the benefits that go along with that such as free prescriptions, and his local authority funding. Once the money he has goes down to £23,250 he will be able to re-apply for local authority funding although the package might not be as generous as it was when he applied first time round because the local authority are putting budget cuts in place. He will have to wait until his money has fallen to £16,000 to be able to apply for Universal Credit again and won't receive the whole amount until his money has fallen to £6,000. If he tries to spend the money so he reaches those levels faster, he could be treated as still owning it. To make matters worse, Josh isn't actually able to manage £30,000 and so one of his parents needs to apply to the Court of Protection for authority to deal with his finances. Granny's gift has well and truly backfired.
What should Granny have done?
Sheila should have left the money to a trust for Josh. That could have been a discretionary trust set up under her Will or one that she set up in her lifetime. Alternatively, she could have contributed to a trust set up by somebody else for Josh's benefit. That way the trustees would look after the money for Josh, it wouldn't affect his means tested benefits or care package and it could be used for what Sheila intended all along; to pay for trips away for Josh for bird watching and painting and for art materials.
To learn more about how to provide for your vulnerable relatives, you can read more in our 'Wills and Trusts for Vulnerable People' information sheet.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
