Published on: 10th August 2020

What is a Disabled Discretionary Trust?

A Disabled Discretionary Trust is a Trust that can be set-up for a disabled or vulnerable person (the beneficiary), who receives means tested benefits, to protect assets in the Trust for the beneficiary.

A typical scenario will be a parent who has a child with some form of mental or physical disability and they want to make sure the assets they own are passed on as efficiently as they can be. With a Disabled Discretionary Trust in place, the assets of the parent instead of being passed straight to their child, will be held in the Trust. The primary reason for this is that the local authority cannot then assess the assets in the trust, with a view to taking away any means tested benefits. If, however the assets were passed straight on to the beneficiary then the local authority may decide to reduce or remove their benefits as they may have the means to pay for care themselves.

How does it work in practice?

With a Disabled Discretionary Trust, Trustees are placed in charge of looking after the assets in the Trust. Trustees will often be the same people as the Executors and will usually be relatives or close friends. Regular meetings (usually every 12-18 months) are needed to make sure the Trust is being administered correctly and the Trust will be administered as defined in the Letter of Wishes. Acting as a Trusteee can be handed over to a professional if required, and we can give advice on this.

The assets in the Trust can be used for anything at the discretion of the Trustees, but if the beneficiary is under 18, then often assets can be used for educational purposes such as private tuition, a school trip or even learning to drive with a car and insurance also covered as well as driving lessons.

When a beneficiary is over 18 the assets will often be used for a range of things. For example, a disabled beneficiary could ask the Trustees for £10,000 to make a house they are moving into wheelchair accessible.

Generally, a Trustee should think (especially in the scenario described in this article) about what the deceased parent of the beneficiary would do, particularly if the beneficiary is vulnerable and unable to make decisions for themselves. A likely scenario is often an agreed amount for the beneficiary from the Trustees that can be used for day to day living – usually a set amount each month with bigger purchases then discussed separately.

Why else is a Disabled Discretionary Trust important?

As well as the obvious financial benefits from a Disabled Discretionary Trust, having one in place will also protect the beneficiary if they are vulnerable. Someone who is vulnerable and has just received a large pay out as the beneficiary from a Will may not fully grasp the situation and therefore could be susceptible to external influence and unfortunately there are circumstances where people in this situation are taken advantage of. A Disabled Discretionary Trust removes this scenario as the vulnerable person then has a group of trusted people making financial decisions on their behalf.

If you would like to know more about setting up a Disabled Discretionary Trust or are concerned the one you have in place needs updating, then get in touch with us and we can arrange for one of our Consultants to talk you through options. Please visit the contact page of our website to get in touch or call 01732 868190 and one of our friendly team will be able to advise.

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