I wonder if anyone can help with a hypothetical scenario:
If a residuary beneficiary lacks capacity and is subject to means-tested benefits, and has an attorney appointed under an LPA, can the attorney enter into a Deed of Variation on their behalf to protect their entitlement to benefits? I understand that it could be viewed as the donor making a gift, which has limited scope because redirecting a substantial inheritance would be difficult to justify as in the donor’s best interests, but what if the Deed of Variation redirected it to a Disabled Person’s Trust established by the Deed of Variation?
Alternatively, what if the residuary beneficiary did not have an LPA in place - would anyone be in a position to authorise their being a party to such a Deed of Variation?
A deed of variation, no matter who does it, is a gift for benefits purposes and would therefore run the risk of it being treated as deliberate deprivation.
The “magic” of a deed of variation only applies to IHT and CGT.
Lee Young
Solicitor, Trust & Estate Practitioner, Chartered Tax Adviser
I’d add that an attorney does not have power to settle the donor’s assets, irrespective of whether it is in their best interests, without CoP approval.
I agree with the comments so far. COP authorization would be required but in terms of the current position (with the limited details) it seems unlikely to be given… usually preserving the right to means tested benefits or avoiding tax are rarely considered by the COP to be in Ps best interests.
Many years ago I was faced with a beneficiary who was on Pension Credit and wanted to give her Inheritance to her children to preserve these benefits. We even went as far as seeking Counsels advice - partly because she did not like the advice being given and Counsel confirmed it would be treated as a deprivation of assets for these purposes.
A decision by an Attorney on behalf of a Donor who lacks capacity must be in the best interests of the Donor. Would it be in the Donor’s best interests not to accept the residuary estate of the deceased? Provided the Attorney knows the consequences of the Donor depriving herself of assets, it is for the Attorney and not the legal adviser, to decide what is in the best interests of the Donor.
I’m not sure anything justifies the donor making a substantial gift, including any settlement (even one for their own benefit). I’ve always understood that such a transaction would be in breach of s.5 MCA without prior CoP consent.