In a very recent decision of the Court of Protection, in LMS, Re (settlement of property into a trust)  EWCOP 52 District Judge Beckley authorises the inheritance of a protected party to be placed into a disabled person’s trust on the basis that it effects the intention of the testator.
LMS is 21-years old and suffers with Sotos syndrome. She receives means-tested Employment and Support Allowance. LMS attends a specialist residential college for young learning-disabled people which is funded by the local authority. The residential component of that funding is also means-tested.
LMS's grandfather died on 22 January 2018, leaving a will dated 9 June 2015. Pursuant to clause 3.2.1(a) of his will, he left 30% of his residuary estate is to LMS, subject to her attaining the age of 25.
This share amounts to approximately £170,000.
Generally, where a legacy is left in a will subject to the beneficiary attaining a specified age, the fund will be held on trust until the beneficiary attains the specified age, at which point they become absolutely entitled.
The Applicant, FSS, is LMS's mother. The application sought to place LMS’s inheritance into a disabled person's trust to be held by LMS's parents for the benefit of LMS, by way of the execution of a deed of variation to LMS’s grandfather’s will.
LMS, represented by the Official Solicitor, was the first respondent.
The second to fifth respondents were family members of LMS. They all supported the application but took no part in the hearing.
LMS executed a lasting power of attorney in 2019 appointing her parents as attorneys. However, Dr Peter Birtles, a general practitioner, assessed LMS on 11 July 2020 and concluded that she lacked capacity to make sound financial decisions on the basis that she is unable to understand the concept and importance of money.
Dr Birtles has also confirmed, prior to that assessment, that in his opinion LMS lacked capacity to agree to the deed of variation.
The Applicant’s position
FMS contended that the proposed deed would allow LMS to continue to receive means-tested benefits but submitted that it would not amount to a deprivation of capital for three reasons:
- The significant operative purpose of the variation is not to deprive LMS of capital;
- LMS cannot be said to understand the capital rules or intend to frustrate them; and / or
- Any deprivation would not be a voluntary act or choice of LMS.
Relying on the decision of McBride J in In the matter of the will trusts of Sarah McCullagh  NICh 15, FMS submitted that the court should find that it was the intention of LMS's grandfather that LMS should benefit from her inheritance and that to allow the application would 'better effect' the intentions of her grandfather and that this was the significant operative purpose of the proposed settlement rather than to deprive LMS of capital.
The Official Solicitor’s position
The Official Solicitor was unpersuaded that the proposed deed was in LMS’s best interests.
Although her position was said to have been reached with “considerable reluctance”, the Official Solicitor contended that the proposed deed would clearly not be in LMS's best interests were it not for the effect on LMS's eligibility for means-tested benefits.
It was agreed by FMS and the Official Solicitor that in receiving her inheritance from her grandfather, LMS’s capital would preclude her from receiving her means-tested benefits.
Judgement and comment
The court admitted LMS’s grandfathers will file as evidence and noted that it was evident from the file that LMS’s entitlement to means tested benefits was discussed at the initial meeting.
District Judge Beckley commented that
“I discern from the will file that he intended LMS to benefit financially from her inheritance and that he would have altered his will had he received information confirming an adverse effect on LMS's benefits as the will was initially drafted.”
Interestingly, therefore, the court accepted that unless the proposed deed would allow LMS to continue receiving her means tested benefits, it would not be in her best interests, the court was satisfied that the continuing eligibility of LMS to means-tested benefits and funding was not the significant operative purpose of the proposed deed. Indeed, the court was clear that this was not the court's motive in authorising the deed on behalf of LMS.
Rather, the court concluded that the proposed deed should be authorised on the basis that it would better effect LMS’s grandfather's intention - that his will would financially benefit LMS.
District Judge Beckley acknowledged that the Court of Protection does not have jurisdiction to determine whether LMS would be entitled to means-tested benefits and funding but that the court was able to “discern and record its own intention in authorising the deed on behalf of LMS”.
The court further recorded, however, in accepting the reasoning of McBride J at paragraph 51 of Re Sarah McCullagh that “it does not offend public policy to authorise a disabled person's trust that has the effect of maintaining LMS’s entitlement to means-tested benefits.”
It will be interesting to see whether this judgment opens the door for similar applications of this nature and what approach will be adopted, particularly in circumstances where the court’s motive was made clear. Further comment is eagerly awaited.
One other interesting point to take away from the judgement is the reminder that capacity is very much time and issue specific. Indeed, DJ Beckley recognised that “It may seem odd that Dr Birtles considers that LMS had capacity to enter into the LPA yet she lacks capacity to enter into the deed. However, capacity is issue specific. The matters which have to be understood, retained, weighed and communicated in relation to the LPA are different to those matters in relation to the deed.”
This case also signifies the importance of giving careful consideration, when preparing wills, to the circumstances of the chosen beneficiaries to avoid such situations arising.