A local authority want to take a property held in a discretionary trust into consideration for assessment for care costs. I know that the Care and Support statutory guidance appears to say not (for both capital and income), but is it that straight forward? Does anyone have any experience of this please?
There will likely be a requirement set by the local authority to prove the formalities of LPA 1925 s 53(1)b are in place in respect of trusts of real property. Then then timing of the disposal is likely to be relevant. Was there a foreseeable need of care at the time? Finally there may potentially be a requirement to prove the intention of the transfer went beyond avoiding the inclusion of the property in a financial assessment. Is there evidence of a genuine estate planning intent. All these factors are likely to be subject of LA inquiry.
Prima facie, it seems to me, that the local authority should not, absent a specific legal authority on the point. A beneficiary of a discretionary trust merely has a right to be considered for benefit by the trustees under their discretion. That was demonstrated by the House of Lords in Gartside -v- IRC, which led to a re-writing of the legislation on death duty, as it then was, in Finance Act 1894.
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The OP does not clarify the status of the care recipient. We’re they a settlor of the trust or are they solely the beneficiary of a trust in respect of which the settlor is another person?
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Thank you all for your responses. The care recipient is the settlor of the trust Sonia, thank you.
I’m a tax specialist so this isn’t really my area but I believe that since March 2024 they now treat this as a deprivation of assets where the beneficiary is also the settlor.
The Care and Support statutory guidance of 22 July 2025 is very useful, especially as the Regulations are such hard going, not least because of the cross-references to the income support regulations.
The Annexes are especially helpful. The regulations treat certain items as notional capital or income to which an individual is to be treated as entitled though not so in law. One category includes broadly items to which a person would be entitled if application were made. But income and capital of a discretionary trust is NOT to be so regarded: Annexe B 58(a) and Annexe C 38(a). Of course actual payments would be included.
The other category of notional income or capital comprises items which a person has deprived himself “for the purpose of decreasing the amount” he would otherwise be liable to pay towards care costs: Regs 17 and 22 of SI 2014/2672.
Annexe E deals with this. Para 5 states that the local authority should not assume this is the case. Para 8 states that it up to the person to prove to the local authority that they no longer have the asset. No doubt the person needs to provide an explanation with transparency as to the facts. But this cannot be a proper statement of the burden of proof. A person’s “purpose” is to determined objectively as a fact (famously like the state of his digestion) by evidence and the burden of proof is on the party making the relevant assertion. I suggest that it is up to the local authority to demonstrate on a balance of probabilities that a person had the purpose outlawed by Regs 17 or 22.
There is absolutely no hard and fast rule that the person being the settlor of a DT has that purpose just because he is a beneficiary and one would expect Annexe E to mention that if it was critically important. Para 11 and 12 confirm that in all circumstances the local authority should have regard to the conclusions which might “reasonably” be drawn from the facts I.e. an objective evaluation. Para 12 is something anyone planning a gift should bear in mind and retain contemporaneous evidence of for future proof.
Jack Harper
The Local Government and Social Care Ombudsman guidance for practitioners might be worth a read:
It would be interesting to learn what reasons the settlor gave for putting their own property into trust other than to avoid care fees