I have been approached by the trustees of a life interest trust. They are also close relatives of the life tenant who is currently in receipt of means tested benefits.
The trust deed states that the income must be accumulated for the first 21 years, which will come to an end in 2021. The trustees want to ensure that in 2021, the means tested benefits will not be affected by the beneficiary’s right to receive the income. I will advise them to check whether or not the income will actually affect the benefits as if it doesn’t, they may not have an issue.
However, to avoid the problem, they are considering investing the trust fund in non-income producing assets, e.g. an investment bond. I am not entirely comfortable with this because as trustees, they have an obligation to balance the income and capital growth and if they arrange matters in this way I think they will be acting in breach of trust. I am also concerned that the motive is to ensure that the benefits are not affected. Does anybody think this is suitable solution?
The trust deed is very simple. There is though a power to apply the income elsewhere for the beneficiary’s benefit and to appoint capital not exceeding £500 on each occasion. I can’t see that either of these points help though as the beneficiary simply doesn’t need the income, his needs are all met from his benefit payments.
Anna Howat
Chattertons Solicitors