The trustees of a discretionary settlement are mum and dad and their two adult daughters.
The trustees let out the settlement residential property to a state pensioner relative of the four trustees who has fallen on hard times. Rent is charged by the trustees at a reduced rate of £300 per month (£3,600 per annum), although the market rent is probably above £400 per month. The settlement deed authorises the letting of the property to this unfortunate relative who has no savings.
The unfortunate relative has started moaning about being unable to afford the rent payable to the trustees, partly because the relative's drug addict daughter, who is unemployable, has decided to move into the settlement property to be with her father. The relative's 2021/22 income seems to be the standard state pension of £9,339.20 plus the tax-free Personal Independence Payment (PIP) which may amount to between around £4,300 to £7,900 per annum (relative is cagey about this). The drug-addict daughter has no income, and it appears this daughter and her father have no stomach for claiming any state benefits for daughter.
Dad trustee feels some sympathy for his unfortunate relative (it is actually his brother) and the drug addict daughter (his niece), and is torn between the trust requirement to receive rents due on the one hand and his brother's income position/problems on the other.
Despite urging the unfortunate relative to apply for Universal Credit, the unfortunate relative has no desire to look into this state benefit. This is borne out of fear of being asked to repay Housing Benefit for earlier years.
I have advised the trustees that I cannot give any advice on state benefits. Dad trustee is more than happy to "hold his unfortunate relative's hand" and take him to the local authority to discuss Housing Benefit, but the trustees' worry is that because the house is owed by a relative(s) of the unfortunate relative no Universal Credit or Housing Benefit is payable.
As it is, the house is owned by the four trustees from the same family. It appears the unfortunate relative was grilled by the local authority housing benefit department or Universal Credit website as to the relationship between him and his landlord, and has confusingly told them that he rents the property from his brother (untrue - it is the trustees who are letting the trust property).
The trustees really only wanted to know if the letting to a relative makes any difference to state benefits compared to a rental to an unrelated party. The trustees want to do the honest thing, but cannot vouch for the honesty of the unfortunate relative or his drug-addict daughter.
I do not know the answer to this conundrum but wonder if anyone out there does.