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Making a Will is one of the most important things you will do in your lifetime. It caters for far more than just who will benefit from your belongings (your estate).

Disabled Trust

A trust is an arrangement whereby ‘trustees’ hold and administer property or money for the benefit of others known as ‘the beneficiaries’. The trustees become the legal owners of the trust property. Disabled Trusts are discretionary trusts, as the administration of the trust is at the discretion of the trustees.

Trusts for disabled people and children get special tax treatment which means they should ultimately pay less tax. These trusts are known as trusts for ‘vulnerable beneficiaries’.

Discretionary trusts of this nature are set up by parents or other relatives to ensure long term financial provision for a disabled child or relative. The beauty of a trust is that once the trust fund has been established, (property or money), the assets do not belong to either the parent or the child, they belong to the trust. This means that the capital held within the trust is not taken into account when assessing entitlement to state benefits like income support or local authority funding in care.

The beneficiaries of this type of trust have no legal right to demand payment of the trust income or the capital within the trust. Payment is solely at the discretion of the Trustees, as well as the amount that is paid, and the schedule of payments. The trust deed will clearly define the scope of the trustees, and what powers they will or will not have.

A disabled trust can be written into a Last will and Testament, or can be written as its own comprehensive ‘trust deed’. A disabled trust within a Will takes effect on the death of the creator of the trust (the settlor), whereas a trust deed can take effect immediately.

The most common method of a disabled trust is to incorporate it into a Will, as the settlors cannot afford to lose control of the assets to be placed into the trust in their lifetime. A disabled trust is tailor made to suit the needs of the person involved, but either method, whether by Will or by trust deed has its own tax implications.

If you have a vulnerable beneficiary, it is important to get the right advice in constructing a trust, as by leaving a portion of your estate to the beneficiary absolutely will restrict the amount of care that will be given by the state. For example, if you leave assets worth £7,000, then it will remove the beneficiary from receiving some state benefits, as they are means tested, and will not be awarded when there is over approximately £3000 worth of assets. It is also worth considering that if the beneficiary is unable to manage money, the Court of Protection would become involved. They appoint a ‘receiver’ to look after the money and other assets, and is unlikely to be the person you might have chosen.

Each disabled trust is tailor made as no two situations are ever the same. Some beneficiaries may have physical disabilities, and others may have mental disabilities. There may be more money to put in trust than others, or the trust fund might consist solely of the family home, that you might wish the beneficiary to stay in. Getting the correct advice is crucial.

CREATING A DISCRETIONARY TRUST

There are a number of reasons that there might be in creating a trust. For example:

  • You may have fears that the local authority will not always continue to provide care or even provide insufficient care
  • You might wish to provide a fund to ‘top up’ what a local authority is prepared to pay for care or even ensure a better quality care package
  • You may wish to enable the beneficiary to remain where they are rather that be forced to move
  • You may simply wish to provide more options for the beneficiary for the future

The Trust Deed is effectively a list of directions for the Trustees to follow. Some of the objectives it will detail will be:

  • The purpose of the trust
  • The names of the trustees or alternative trustees, should something happen to a trustee, and how they might be appointed
  • The names of the beneficiaries
  • If a professional trustee is appointed, such as a financial advisor or solicitor, how their fees and expenses are to be paid
  • The powers, duties and discretion that the trustees will have with the trust fund. This might include investing some of the proceeds to make a return, or the payments of bills for example.
  • It will also note what will happen to the funds held in trust on the death of the beneficiary.

We also draft a comprehensive letter of wishes when we construct a discretionary trust of this nature, so that the settlors (the creators of the trust fund) can provide a written account of their wishes, without the legal jargon that the trust fund will provide.

 

To arrange an appointment with Ian please contact us on 01834 815062 or click here to email us.

What is a will?

A will is a legal document where a person, names one or more persons to manage his or her affairs and estate. In “olden” times, a Will referred to property, and a Testament referred to personal property, hence the term now used “Last Will and Testament”.

Intestate

If someone dies without making a will, they are said to have died “intestate”. If this happens, the law sets out who should deal with the deceased’s affairs and who should inherit their estate (property, personal possessions and money).

Contact Us

County Estates & Wills

Sea View

Cambrian Terrace

Saundersfoot

Pembrokeshire.

SA69 9ER

 

Tel: 01834 815062

Email: enquiries@countyestatesandwills.co.uk

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