Introduction
Parents of a disabled son or daughter often describe the same worry. They want to leave them something, and they are frightened that doing so will cost them the benefits, the care package and the housing they depend on.
A Vulnerable Persons Trust is designed to answer that worry. The money is held by trustees for your loved one's benefit rather than being paid into their name, so it can improve their life without disturbing the support that underpins it. How the rules apply depends on their circumstances, which is why we look at each family individually.
The Problem With Leaving Money Outright
Means-tested help is assessed on what a person owns. Capital above £6,000 can begin to reduce entitlement and £16,000 or more usually ends it, and local authority care funding is assessed on similar principles.
So a well meant legacy can do real harm. A disabled beneficiary receives a share of an estate, loses income-related support and their care contribution changes, and within a few years the inheritance has been spent replacing help that used to be provided. Nothing has been gained.
There is a second problem. Someone who cannot manage money safely, whether because of a learning disability, a fluctuating mental health condition or susceptibility to pressure from others, may not be able to protect a lump sum at all.
How a Vulnerable Persons Trust Works
The trust, not the beneficiary, holds the money. Trustees you choose are responsible for looking after it and for using it in the beneficiary's interests, and because the funds are not the beneficiary's own capital they are generally left out of means-tested assessments.
Trustees pay for the things that make daily life better and that state support does not stretch to. In practice that means equipment and technology, adaptations at home, therapies, respite, transport, activities and holidays, clothing, furniture and companionship. They can also pay for a support worker or fund a suitable property for the beneficiary to live in.
The trust can be created by your will, so it comes into being when you die, or set up now if funds are available. Either way it can receive gifts from grandparents and other relatives, which saves the family making several separate arrangements.
These trusts are often used for a young beneficiary who has lost a parent as well as for a disabled person, and they can run for as long as they are needed.
Choosing the Right Trustees
Trustees of a Vulnerable Persons Trust need more than good financial sense. They need to know the person: what they enjoy, what unsettles them, how they communicate and what a good day looks like.
Most families appoint two or three people, mixing a sibling or close relative who knows the beneficiary well with someone who is comfortable dealing with accounts and paperwork. Because these trusts can run for decades, we always plan for succession so there is never a point at which nobody has authority.
A letter of wishes is especially valuable here. Written in your own words, it tells future trustees what matters to your loved one, and it is often the document a new trustee is most grateful for.
Tax Treatment for a Disabled Person's Trust
Where the conditions are met, a trust for a disabled person can qualify for special tax treatment, which broadly means it is not subject to the same periodic and exit charges as an ordinary discretionary trust and may be taxed more closely to the beneficiary's own position.
The conditions are detailed. They concern the beneficiary's circumstances, including qualifying disability benefits, and how the trust deed is drafted, particularly as regards how much must be applied for that beneficiary. We will not tell you in advance that any given trust qualifies, because the answer depends on the facts.
What we will do is look at the individual position, tell you honestly whether the special treatment is likely to be available, and draft accordingly. Where the tax position is complex or a formal opinion is needed, we work with a local solicitor and are able to cover any and all of your requirements.
Fitting the Trust Into the Wider Plan
A trust rarely stands alone. Families in this position usually need matching wills for both parents so the arrangement works whichever of them dies first, and they need to think about who will make decisions for the beneficiary day to day.
We look at the whole picture with you, including Lasting Powers of Attorney for the parents, any deputyship or capacity issues affecting the beneficiary, and how siblings are provided for so that nobody feels overlooked.
We also make sure relatives who want to help know how to leave money to the trust rather than to the beneficiary directly, which is one of the most common ways good intentions cause harm.
Our Vulnerable Persons Trust Service
- A free consultation, at your home if that is easier, taking the time this subject deserves.
- A clear explanation of how the trust protects means-tested benefits and care funding.
- Advice on whether a disabled person's trust or a wider discretionary trust suits your circumstances.
- Drafting the trust and the matching provisions in both parents' wills.
- Guidance for trustees on their duties and on paying for things the right way.
- Help writing a letter of wishes about your loved one's needs and preferences.
- A plain note for grandparents and relatives on how to leave gifts to the trust.
- Ongoing support for trustees for as long as the trust runs.
Call us on 0800 048 7320 and tell us about your family. There is no charge for the first conversation and no pressure afterwards.
Frequently Asked Questions
What is a Vulnerable Persons Trust?
Will a Vulnerable Persons Trust affect benefits or care funding?
Working alongside a local solicitor
We work with a local solicitor and are able to cover any and all of your requirements. If in doubt, call us on 0800 048 7320 and ask, or use the contact form on our home page.
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There is no charge for the first conversation and no pressure afterwards.
