Extra Support Where It’s Needed

What are Disabled Person’s (also known as Vulnerable Beneficiary) Trusts? Well, they’re a type of Trust that have specific support built in to help people with disabilities or those who are vulnerable.

These terms can encompass a whole range of conditions, so it’s important to consider what kind of support they will need to be provided with when you’re building your Trust.

discretionary trusts hero image

What is a Trust?

A Trust is a way to maintain control over your assets and how they’re handled after you’re gone. You’ll have control over who has access and distributes your money, your property, and other valuables, meaning you can safeguard them from the wrong people.

This differs from simply leaving your assets in a Will, as you lose all control over your assets once they’re inherited by your beneficiary.

Find out more about Trusts and their benefits on our Trusts page here.

tprotect icon

Protect your assets from certain fees and Taxes.

inheritance icon

Maintain control over how your assets are used.

How does a Disabled Persons Trust work?

In order to set up a Disabled Persons Trust, you’ll need to meet several conditions. The beneficiary must qualify as a disabled person as defined by the government in order to be a valid recipient of the assets you place in the Trust. You can find out more about these guidelines below.

You can either write your Trust as a Life Interest Trust, or as a Discretionary Trust. These differ in which assets can be accessed by the Beneficiary, and how much flexibility the Trustee has to dispense assets from the Trust.

Life Interest Trust

life interest trust

Your assets are usually invested by the Trustee and any money which is earned through the investments are available to the Beneficiary throughout their lifetime. Any income which is received by the Beneficiary will be taken into consideration if they apply for any means tested benefits.

Discretionary Trust

discretionary trust disabled persons

This type of trust gives more flexibility to the Trustee and how they distribute the assets in the Trust to the Beneficiaries. You can provide a letter of wishes, to help guide their decisions, but the Trustee can give access to any of the assets as they see fit. You can also include more than one Beneficiary in this Trust type.

Who qualifies for a Vulnerable Beneficiary Trust?

There are guidelines on who qualifies to be named as a Beneficiary on a Disabled Persons, or Vulnerable Beneficiaries, Trust. These are determined by the HMRC and can be someone with a mental disorder, or someone who qualifies as disabled under a “benefits” test (not necessarily receiving the benefits).

Determining what qualifies as a mental disorder or condition in this case, they refer to the Mental Health Act 1983, which includes:

  • Bipolar Affective Disorder
  • Schizophrenia
  • Major Depressive Disorder
  • Anxiety Disorders
  • Obsessive Compulsive Disorder
  • Eating Disorders
  • Autistic Spectrum Disorder
  • Alzheimer’s and other forms of dementia
  • A learning disability incl. Down’s Syndrome
  • Brain injuries dependent on symptoms

They can also be a person who are eligible for any of the following benefits:

  • PIP (Personal Independence Payment)
  • Disablement Pension
  • Constant Attendance Allowance
  • Armed Forces Independence Payment

Having one of the above conditions doesn’t automatically qualify someone as disabled, however. They must also be found to be incapable of managing their affairs.

When will a Discretionary Trust be the best option?

There are many reasons why you, as the Settlor who is setting up a Trust, may choose a Discretionary Wills Trust over a Life Interest Trust. As everyone’s situation is different, it’s important to really think about what would work best for you and your Beneficiary. Handing some discretion over to your trustees can be a good idea if your Beneficiaries may need additional support in handling any of the assets within the Trust for any reason.

It also means that the Trustee can use the assets to pay for anything the Beneficiary may need to improve their life, such as medical costs, or pay for holidays and other experiences. These will all avoid their means tested benefits being affected, which would happen if they received a lump sum of money or a regular income from it.

To see what would work best for you, speak to one of our friendly team who will be able to advise you on your options, and which would help you make the most of your assets.

taxes icon

You have a beneficiary who doesn’t have the capacity to manage their finances.

inheritance icon

You want to take advantage of special tax rates for the disabled person’s inheritance.

inheritance icon

You want your Trustee to have the flexibility to make decisions on your behalf.

benefits icon

You don’t want the means tested benefits your Beneficiary receives to be affected.

How Can a Trust Help me Protect my Assets?

assets

Choose exactly who has access to your assets.

inheritance

Enjoy your privacy – Trusts aren’t public documents, unlike Wills.

health

Save on inheritance tax – don’t let your loved ones lose out.

business

Provide better financial support for your dependants’ futures.

family

Give your loved ones quicker access to their inheritance when you’re gone.

flexibility

Gain better flexibility over how your assets are managed in the long-term.

The Trusts we offer are an optional addition to our Bespoke Will service. Click here to find out more about Bespoke Wills.

Learn More

Who Can I Appoint as a Trustee?

You’ve got to make sure that no matter what type of Trust you’re creating, you choose responsible and reliable trustees. All trustees (and there can be more than one per Trust) must meet the following criteria:

check mark

They must be at least 18 years of age.

check mark

They can be a family member, friend or professional acting on your behalf.

check mark

If you’re creating a Trust which will be effective whilst you’re alive, you can be the trustee.

check mark

You must be confident that they have the best interests of the beneficiaries at heart.

check mark

We advise you to choose at least 2 trustees, but no more than 4. Make sure there’ll be no tension between the trustees.

check mark

If you’d rather have someone outside of your family be a trustee, you can appoint a professional such as a solicitor, Trust company or accountant.

check mark

They’ll need to fully understand the responsibility of managing the Trust on your behalf.

check mark

It’s a good idea to name substitute trustees, to replace a trustee should anything happen to them.

Discretionary Trust Case Study

A Trust can include any wishes about how your estate should be handled by the trustee, and you are able to express more complex wishes in how you’d like your estate to be managed.

Steven and Alison have a single child, Claire, who has been diagnosed with Bipolar Affective Disorder and OCD. Although she lives independently, her conditions are classed as severe and she regularly needs ongoing support and experiences periods of crisis which mean she’s admitted to hospital.

One of her biggest struggles is managing her finances, whether she is in depression or mania. She has blown large amounts of money in the past and her parents are concerned about leaving her assets in their Will which she could have unrestricted access to.

To combat this, Steven and Alison decide to create a Discretionary Disabled Persons Trust and name Claire as the main Beneficiary. They appoint Claire’s uncle, James, as the Trustee, as he knows about her condition well and is knowledgeable enough to manage the assets within the trust on her behalf.

When Alison and Steven die, James takes over management of the Trust. He has a letter of wishes which explains how Alison and Steven would like to have the assets used, but he also has flexibility to make decisions himself dependent on Claire’s situation at that time. He can access money within the Trust to pay for things she needs, such as private healthcare and counselling sessions, as well as personal needs such as clothes.

How does the Discretionary Trust Help?

By managing Claire’s needs in this way, she isn’t able to access large sums of money when she is unwell, but can have things paid for as she requires them. This independent support from her uncle allows her to get the financial support her parents wanted her to have, but without the risks. As she doesn’t get regular payments or a one-off sum of money directly, her PIP benefits payment remains unaffected.

trusts case 1

Questions

  • Yes, you can. An individual can be both a Trustee and a Beneficiary, for example. To figure out how best to plan your Trust, speak to our specialists who can guide you through your options.

  • This document supports the Trust Deed and outlines your wishes for the assets placed within the Trust. Although not legally binding, it gives guidance to the trustees on how you’d like your Trust to be executed on your behalf. You can update this as often as you want without having to amend the Trust Deed itself.

  • When the beneficiary of a Trust dies, the Trust is then “wound-up”. When creating your Trust Deed, you should name back-up beneficiaries to inherit any assets which remain in the fund if the original beneficiary dies. This can be family, friends or even charities.

  • It depends on the type of Trust. If the Trust Deed states that they can’t access funds before a certain age, or must meet a set of requirements, then it’s unlikely that assets will be released early without very good reason.

    If the Deed states that the beneficiary can have discretionary access to the Trust at any time, then the beneficiary will need to formally petition the trustee. The trustee then decides whether to release the funds.

  • It depends on the type of Trust. Some types of Trusts are tax exempt, or are only subject to charges if they’re over a certain value. There are three main tax implications to consider when creating your Trust, including:

    • Income Tax
    • Capital Gains Tax
    • Inheritance Tax

    To find out more about how taxes can affect you, and how to protect your funds as much as possible, just get in touch.

  • No, you can also put companies, stocks and other valuable assets into a Trust. It’s not limited to money and property.

  • Only you, the trustee, and any beneficiaries are able to see the Trust documentation. Unlike Wills and some other legal documents, Trusts aren’t made public, even after death. It’s another benefit of using Trusts alongside or instead of a Will, as the contents remain private at all times.

  • With so many types of Trusts available, it’s difficult to know where to start. That’s why we’re here to listen to your personal circumstances and wishes – then, we can guide you towards the best Trust for you. With so many complexities, you need to seek the advice of a specialist to avoid any unwanted issues.

Get in touch