The following Trusts and Inheritance Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
Often, the reason for creating a trust is to provide for beneficiaries who cannot support themselves or who are unable to manage their own affairs. Such vulnerable beneficiaries may be in receipt of welfare benefits or care services. This should be a primary consideration for trustees who intend to help them. To complement the support provided, the trustees need to know what the beneficiary receives and also what the rules are relating to each of the benefits received. An understanding of the rules is particularly important in relation to any means tested benefits because providing the beneficiary with excess funds may have the inadvertent result of reducing, or even eliminating, the benefit entitlement.
Some benefits are means tested, while others are not. Means testing involves a financial assessment of the claimant’s level of income and their capital. Income and capital above certain thresholds result in a reduction of the benefit paid. Trustees need to be aware of the effect of trust payments on the benefits received.
The most common means tested benefits are as follows:
Employment and Support Allowance (income-based)
Jobseekers Allowance (income-based)
Working Tax Credit
Child Tax Credit
Child Benefit is means tested in a different way from the other benefits, and at a much higher income level by application of the high income Child Benefit charge. See the High income child benefit tax charge ― overview guidance note in the Personal Tax module. Potentially, it has a wide application to any beneficiary of a trust who is a parent of minor children, and not just to those beneficiaries one would traditionally regard as vulnerable.
In addition to the above central government benefits, local authorities are responsible for the provision of social care to elderly and disabled residents. Residential care, and
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