Published on: 9th January 2023

Using a trust to protect assets for vulnerable or disabled individuals

A Trust in your Will allows you to protect property or money by transferring it to individuals you trust (these individuals are trustees) to hold it for the benefit of one or more individuals, these individuals are the beneficiaries. It is possible for your trustees and beneficiaries to be the same people.

When discussing the benefits of these trusts with clients, some families decide that they will give their estate, wholly or partly, to other beneficiaries with an informal understanding they will use it to help a vulnerable or disabled beneficiary. However, this agreement is not legally binding or enforceable and the inheritance may not be protected from divorce proceedings or if the other beneficiaries pass away. Alternatively, if you wish to provide for a vulnerable person without a trust, their inheritance may be included in care fee assessments and may impact their entitlement to any means tested benefits.

A Vulnerable Persons Trust is a discretionary trust, this means that the trustees have full discretion regarding the distribution of income and capital. If certain conditions are met the trust also receives favourable tax treatment. In this event, trustees can apply to HMRC to classify the trust as a “qualifying trust”. In addition to this benefit, the trust also allows protection against financial abuse by the beneficiary and if a property is held within the trust, then the trustees are responsible for maintaining this property, which may be extremely difficult for the vulnerable beneficiary. Another advantage is that any funds can be used to “top up” care plans without affecting care funding or benefits.

A recent case in court has highlighted the importance of ensuring a testator protects inheritance for a vulnerable person via their Will. In F v R (2022 EWCOP 49) the testator did not include a vulnerable persons trust within their Will and left approximately £500,000 to a man with severe disabilities. The family of the gentleman was unable to put this inheritance into trust after the passing of the testator and therefore the vulnerable person lost his capital means-tested benefits.

If any of your beneficiaries are vulnerable or disabled, please contact us to arrange an appointment to discuss a trust further with one of our consultants.

A Trust in your Will allows you to protect property or money by transferring it to individuals you trust (these individuals are trustees) to hold it for the benefit of one or more individuals, these individuals are the beneficiaries. It is possible for your trustees and beneficiaries to be the same people.

When discussing the benefits of these trusts with clients, some families decide that they will give their estate, wholly or partly, to other beneficiaries with an informal understanding they will use it to help a vulnerable or disabled beneficiary. However, this agreement is not legally binding or enforceable and the inheritance may not be protected from divorce proceedings or if the other beneficiaries pass away. Alternatively, if you wish to provide for a vulnerable person without a trust, their inheritance may be included in care fee assessments and may impact their entitlement to any means tested benefits.

A Vulnerable Persons Trust is a discretionary trust, this means that the trustees have full discretion regarding the distribution of income and capital. If certain conditions are met the trust also receives favourable tax treatment. In this event, trustees can apply to HMRC to classify the trust as a “qualifying trust”. In addition to this benefit, the trust also allows protection against financial abuse by the beneficiary and if a property is held within the trust, then the trustees are responsible for maintaining this property, which may be extremely difficult for the vulnerable beneficiary. Another advantage is that any funds can be used to “top up” care plans without affecting care funding or benefits.

A recent case in court has highlighted the importance of ensuring a testator protects inheritance for a vulnerable person via their Will. In F v R (2022 EWCOP 49) the testator did not include a vulnerable persons trust within their Will and left approximately £500,000 to a man with severe disabilities. The family of the gentleman was unable to put this inheritance into trust after the passing of the testator and therefore the vulnerable person lost his capital means-tested benefits.

If any of your beneficiaries are vulnerable or disabled, please contact us to arrange an appointment to discuss a trust further with one of our consultants.

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If you wish to give instructions or require general information about our Wills, Lasting Powers of Attorney, or Trusts then we will carry out a telephone or Zoom appointment. However, if you wish to give instructions to one of our Consultants and you feel that you can only do this at a Face to Face meeting we are offering, at our Consultant’s discretion, a limited number of Face to Face appointments in most of the areas we normally cover (subject to Government advice). To see the areas we normally cover please click here. To arrange an appointment please telephone 01732 868190 or click here.

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