Trusts are used to benefit Vulnerable or Learning Disabled beneficiaries for a number of different reasons:
- The beneficiary’s capacity might be such that they are unable to manage their own finances without support and so they would simply not be able to look after an inheritance by themselves.
- Even with sufficient capacity, a beneficiary might still be vulnerable or susceptible to undue influence, or exploitation and financial abuse.
- The beneficiary might, or might in the future, be in receipt of means tested benefits or means tested social care and support which would be lost if they inherited from you.
Using the right Trust as a vehicle, permits the money or assets in the Trust to be disregarded for the purpose of means testing for benefits or care and support packages. The money can be used for the long term benefit of your loved one, for example, paying for services that the State won’t fund or for luxuries like holidays etc. and their various benefits or services remain secure.
There are only two types of Trust that work in these circumstances, a fully flexible Discretionary Trust and a Disabled / Vulnerable Person’s Trust.
The choice between Discretionary or Disabled Persons Trusts – which is right for you?
You might assume that a Disabled Persons Trust will be what you need. But I’m afraid it’s not as simple as that.
Choosing which trust is right will depend on a number of factors which are personal to you, to the needs of the disabled or vulnerable person and to the circumstances of the rest of your family, including:
- Whether or not the beneficiary will qualify as a Disabled or Vulnerable beneficiary in the first place.
- Their age, the nature and the long-term prognosis of their disability and the type of benefits the Disabled or Vulnerable beneficiary is in receipt of.
- Their needs and circumstances, where they are likely to live, who will care for them and how the carers will be paid.
- How you envision them benefitting from the trust. Do you want their partner or children or anyone else to benefit directly or indirectly?
- The needs of other family members.
- The value of the assets that will be passing into the trust.
- Whether you intend to create the trust and vest assets in it during your lifetime or after you have died.
- The value and make up of your own estate.
- What is to happen to the trust assets after the disabled beneficiary has died.
A Disabled Person’s Trust may have some tax benefits in certain circumstances compared to a Discretionary Trust. However, those benefits often come at a price and it is less flexible than a Discretionary Trust, which for long term planning can prove problematic.
Careful discussions and thought are needed before you choose which trust to go for. There should be no assumptions and I can guide you through the pro’s and cons of each to ensure you make the right decision.