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4.7.3.30 Assessable Assets from Discretionary Trusts pre-01/01/2002

Summary

This topic provides information on the following:

  • assessment of assets (1.1.A.290) from discretionary trusts (1.1.D.200),
  • description of asset assessment for different roles within trusts,
  • members of a couple, whether of the same sex or of a different sex who are beneficiaries of discretionary trusts, and
  • summary of assessable assets for pensions, benefits and allowances.

Note: For the assets test treatment of general business items also see 4.7.1.40 and 4.7.1.50. The assessment of general business items applies to all business structures including sole traders, partnerships, private trusts and private companies.

Assessment of assets

If an income support recipient and/or their partner are beneficiaries of a discretionary trust, NO part of the value of the trust assets is assessable, UNTIL the trustee makes a distribution from the capital of the trust.

Explanation: This is because there is no way of apportioning a share of the assets of the trust to any particular beneficiary until the trustee has exercised their discretionary powers.

When the assets of the trust are distributed to its beneficiaries, the amount received is an asset if it is NOT otherwise exempt.

Example: Principal home.

The following table describes how the assets from a discretionary trust are assessed.

If an income support recipient is… Then they…
a CO-BENEFICIARY of the assets of a discretionary trust,

have an asset, however NO value is placed on the asset for assessment purposes.

Explanation: The income support recipient's interest in the asset is dependent on the trustee deciding in what proportion to distribute the trust assets.
the SOLE beneficiary of the assets of a discretionary trust,

are generally considered to have the beneficial ownership of the trust assets.

Explanation: The terms of the trust deed MUST state that the income support recipient has an ABSOLUTE interest in the distribution of the trust assets before the assets can be assessed as the income support recipient's assets.

Member of a couple (1.1.M.120)

If both members of a couple, whether of the same sex or a different sex, are the ONLY beneficiaries of a discretionary trust, and the trust assets are NOT exempt:

  • they are assessed as the couple's assets, and
  • each partner is assigned half of the assets.

Description of asset assessment for different roles within trusts

The following table describes the roles of individuals within a trust and the treatment of their trust related assets. A person may have more than one role, and each needs to be considered separately.

Role Description
Settlor Is NOT usually entitled to a share of the trust assets, but deprivation of assets provisions MAY apply for gifts to the trust.
Contributor Loans made to the trust are assessable assets, and deprivation of assets MAY apply for gifts to the trust.
Beneficiary

Has an interest in the assets of the trust at the trustee's discretion, therefore, NO amount is held as an assessable asset.

Exception: Sole beneficiaries or both members of a couple, whether of the same sex or a different sex, who are the only 2 beneficiaries.
Trustee Is NOT entitled to a share of the trust assets UNLESS also a beneficiary, although asset/s may be registered in their name.

Summary table of assessable assets

The following table summarises the assessment of assets from private discretionary trusts for pensions, benefits, and allowances.

Type of Asset Description
Interest in the trust assets

Do NOT assess the trust assets as assets of the income support recipient.

Explanation: The income support recipient has no entitlement until the assets are distributed by the trustee.
Beneficiary account

Assess as an asset of the income support recipient.

Explanation: The money is put in the account by the trust usually as reinvested trust distributions or interest. These may be called beneficiary loan accounts, current accounts or beneficiary current accounts.

Loan to a trust

Assess as an asset of the income support recipient.

Explanation: The money has been loaned to the trust by the income support recipient. These may also be called beneficiary loan accounts or loans.

Assets gifted to a trust

Maintain the amount which was disposed of, as a deprived asset for 5 years from the date of disposal, LESS the allowable gifting limit.

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