Re LMS (Settlement of Property into a Trust)
In this case, the court was asked to approve a settlement of an inheritance of which P was beneficiary. The application was made by P's attorney under an LPA and opposed by the Official Solicitor acting as P's litigation friend.
P suffered from a significant degree of autism and had a learning disability. She had sufficient capacity to appoint her mother her attorney under an LPA but was assessed as lacking capacity to agree to the settlement of her 30% share of her late grandfather's estate coming into possession when she attained 25 (she was 21 at the time the case was before the court).
P was in receipt of means tested benefits and the local authority paid her residential care fees, again subject to means testing. When her inheritance came into possession, she would those benefits until the capital dropped below the capital limits.
Thus, P's mother proposed a settlement of P's inheritance into a disabled person's trust where the capital would not be taken into account in means testing.
The OS opposed that, saying that the settlement would not have that effect because P would be deemed to have deprived herself of the capital for the purpose of securing the benefits in question and, therefore, the capital would continue to be taken into account.
The OS further said that the settlement would not otherwise be in P's best interests and the court at paragraph 39 agreed, saying:
Firstly, and most importantly, LMS made a capacitous decision that her property and affairs should be managed by her attorneys under the LPA. The proposed deed is contrary to LMS's wishes as expressed through her execution of the LPA. Secondly, the trustees of the proposed trust would not be bound to apply the principles of the 2005 Act to their decisions. Thirdly, the regime of supervision by the Public Guardian of LPA attorneys does not apply to trustees (I do not intend to suggest in any way that the proposed trustees are likely to act other than in LMS's best interests). Fourthly, the proposed deed would mean LMS's capital being managed under the trust and her income under the LPA which does not seem to be the most efficient method of management of her property and affairs.
Thus, the court had to consider whether the settlement would be caught by the anti- deprivation provisions. The court held that any decision that the court made on P's behalf would be attributed to her (see paragraph 50).
Principally, the court had to consider the purpose of the settlement applying the following principles at paragraph 17:
The principles applicable to determining whether a disposal of capital is a deliberate act for the purposes of means-tested benefits were considered by Mr Howell QC then a Social Security Commissioner in R(H)1/06 at paragraphs 20 to 23:
"20. 'I direct the new tribunal that as quite correctly assumed by the previous chairman and not disputed on this appeal, the correct test to be applied in determining whether the claimant is shown to have deprived himself of capital for the purpose of securing entitlement to housing benefit is the well-established one applied on similar wording in the main social security legislation, namely whether the securing of such entitlement is shown to have been a "significant operative purpose" of the claimant's relevant actions in disposing of his capital."
The court was persuaded that securing the entitlement to means tested benefits was not a "significant operative purpose" of the settlement because it would better represent P's grandfather's wishes, namely to benefit P (see paragraph 46). The court applied similar reasoning to that which persuaded the court in a similar fashion in the Northern Ireland case of In the matter of the will trusts of Sarah McCullagh [2018] NICh 15.
Thus, the court decided to approve the settlement.
Comment
The relevant local authority and benefits agency are not bound by this decision and are free to contest the conclusion as to the operative purposes behind the settlement. It must be arguable that if the only reason that the settlement is in P's best interests is that it secures her benefits, then that reason is a "significant operative purpose" of the settlement no matter what the COP says.
