| Circular SWSG5/94 5455 - Community
Care: National Assistance (Assessment of Resources) (Amendment No.2) Regulations 1993:
Regulations and Guidance
SECTION 10 - TRUST FUNDS
This section does not apply to the Macfarlane Trust, the
Macfarlane (Special Payments) Trust the Macfarlane (Special Payments) (No 2) Trust, the
Eileen Trust, the Fund, the Independent Living (Extension) Fund or the Independent Living
(1993) Fund. See paragraph 8.042
What is a trust?
10.001 A trust is an arrangement for one person or a group
of people (the trustee(s)) to hold and administer capital in the form of money or property
for the benefit of another person or group of people (the beneficiary(ies)).
10.002 Examples of capital which might be held on trust
are:
• money awarded by a court as compensation
• proceeds of a separation or divorce settlement
• money set aside by parents to ensure a regular
income for a person who is unable to support himself by reason of illness or disability
• a bequest under a will
Trustees
10.003 Trustees may be:
• a professional person such as a solicitor
• the parents of a beneficiary who cannot act for
himself
• any other responsible person, perhaps appointed
under the terms of a will
10.004 Trustees’ powers are governed by:
a) the terms of any trust deed;
b) the common law in Scotland and the law of equity in
England and Wales; and
c) the Trustee Act or the Administration of Estates Act
1925 in England and Wales or in Scotland, the Trusts (Scotland) Act 1921 and 1961 and the
Trustee Investments Act 1961.
Identifying a trust
10.005 A trust is usually set up by means of a trust deed.
The deed sets out the terms of the trust, and will contain details of the beneficiaries,
the amount by which they should benefit and when payment or payments should be made. The
trust deed could be in the form of a will or Deed of Settlement.
Treatment of Trusts
10.006 A resident’s interest in a trust could take one
of two forms:
a) he has absolute entitlement to capital or income from
the trust (10.008-10.018); or
b) the trustees have discretion to make payments of capital
or income (10.019-10.022).
Information needed
10.007 Where a resident is a beneficiary under a trust,
find out from the trustees or from the trust document whether:
a) the beneficiary is absolutely entitled to money from the
trust;
b) the trustees have discretion to make payments; and
c) the trust is in consequence of personal injury.
Absolute entitlement
10.008 Absolute entitlement means that the beneficiary has
an absolute vested interest in capital held on trust (or in a share of capital held on
trust), and could call for the whole of the capital and income to be transferred to him at
any time. This also applies where the beneficiary is incapable of managing his affairs.
Information needed
10.009 Where the beneficiary is absolutely entitled to
money from the trust (ie has an unconditional right), find out whether he is entitled to:
a) any capital held in trust; and
b) any income produced by the trust assets.
Absolute entitlement to capital
10.010 If the beneficiary is absolutely entitled to
capital, find out the value of the capital. Where a number of beneficiaries have a shared
interest in a trust, divide the total value equally between the joint beneficiaries and
treat the resident as owning an equal share. This method of treatment avoids
administrative difficulties. Once the resident is in sole possession of his actual
share, treat his as owning that actual amount.
10.011 Where the resident is not in possession of capital
to which he has absolute entitlement, but the capital would become available to him upon
application being made, treat him as possessing an actual capital asset. See Section 6
(Capital).
10.012 Some trusts provide for the beneficiary to become
absolutely entitled to the trust capital on a specified ate, for example his 21st or 25
birthday. In these cases the beneficiary has a contingent interest. Once the contingency
is satisfied, the beneficiary becomes absolutely entitled to the capital.
10.013 The capital asset to be taken into account is the
market value, after making an allowance for the value of the underlying assets. It will be
necessary to obtain written evidence of the value of the trust fund. Where there would be
expenses of sale, deduct 10% of the value.
10.014 Where the assessing officer and the resident agree
that the value of the resident’s total capital, including the value of the trust
capital, is:
a) more than £8,000; or
b) less that £3,000
it will not be necessary to obtain a precise valuation of
the trust.
Absolute entitlement to income
10.015 Where a trust deed directs that a beneficiary is to
receive income produced by the trust capital, the beneficiary has absolute
entitlement to the income. The right to receive that income has a value, and the value of
the right to receive income is a capital asset. That capital asset is fully disregarded
for assessment purposes. (see paragraph 10.017 for treatment of the income).
Schedule 4 para 13
10.016 A person who has a contingent interest in capital
(as in paragraph 10.012) becomes absolutely entitled to receive the income from the
capital on his 18th birthday, even where the contingency affecting the capital has not yet
been satisfied. The value of the right to receive income is fully disregarded as in
paragraph 10.015.
10.017 Where a person has absolute entitlement to income
from a trust, the income he receives, or which would become available to him on an
application being made, should be taken into account in full in the assessment. Where the
resident does not receive income to which he has absolute entitlement, but the income
would become available to him upon application being made, he should be treated as
possessing that income as an actual income. (See Section 8 - Income). In order to treat
the income as an actual resource, you must be able to identify the income which should be
paid, and to establish that there is nothing which prevents payments being made, such as a
legal charge against the fund.
Reg 17(1)
Absolute entitlement to capital and income
10.018 Where the beneficiary has absolute entitlement to
capital and income, and is being treated as possessing the capital sum, the income
derived from the capital should be treated as capital, and not taken into account as
income in the assessment.
Reg 22(4)
Discretionary trusts
Information needed
10.019 If the trustees have discretion to make payments of
capital or income, find out whether any payments are made, and if so:
a) how much is paid;
b) how often payments are made; and
c) to whom the payments are made.
Treatment of discretionary payments
10.020 Where payments are made wholly at the discretion of
the trustees and there is no absolute entitlement either to capital or income, only take
into account payments which are actually made. Do not assume notional capital or income
from a discretionary trust (see Sections 8 (Income) and 6 (Capital).
10.021 Payments from a discretionary trust are voluntary
payments. Treat them in accordance with the normal rules for the treatment of voluntary
payments (paragraphs 8.051 to 8.057).
10.022 Payments from a charitable trust which promotes a
public benefit are always discretionary payments. Treat them in accordance with the normal
rules for the treatment of charitable payments (paragraphs 8.051 to 8.057).
Compensation for person injury
Information needed
10.023 Obtain confirmation that the capital held in trust
is a lump sum payment of:
• compensation for injury or death (including vaccine
damage)
• damages under the Fatal Accidents Act
10.024 Find out whether the beneficiary receives any income
from the capital held in trust, and if so:
a) how much is paid; and
b) how often it is paid
Treatment of capital
10.025 Where the capital held in trust is in consequences
of personal injury, both the capital and the capital value of any right to receive income
are fully disregarded.
Schedule 4 para 10
Treatment of income
10.026 Payments of income from capital held in trust which
is in consequence of personal injury is taken into account in full in the assessment for
as long as the capital continues to be disregarded.
Schedule 4 para 10 |
