I probably should know this but for some reason I just can't recall the details so any help gratefully recieved.

I know that the capital of dependent children is not counted as the claimant's capital for HB purposes but how is it decided who the capital actually belongs to? Client is signatory to her dependant grandchildren's (aged 11 & about 16) special 'kids' bank accounts and seems to have free use of them (ie no trusts etc.). Local HB unit have intimated to her that this money will be treated as her capital, are they right in this assumption ?

From what you describe, she is treating the money as hers. This can only mean one of two things:

1. it is hers; or

2. it isn't hers, but she's taking it anyway.

If the latter and the money actually belongs to her grandchildren, she is acting in a fiduciary position which means like a trustee even if there is no formal trust - much like an attorney or an appointee. Taking it is a breach of that duty and she could be forced to pay it back.

So what does she say about it? Where did the money come from and if she is spending it, what on?

Lots of people don't actually know that you can have a trust without any sort of writing if it's just money - all you need is an obligation to manage the money for the benefit of the beneficiary. They also don't know that if you create a trust you can't change your mind later if it proves to have been inconvenient to have given the money away.

She is going to have difficulty arguing that it doesn't belong to her and that she is taking it in circumstances which might be close to theft, if the money really is the children's.