Leaving money to a disabled person in a will trust
Leaving money to a disabled person in a will trust
If you leave money to a disabled person in your will, it can affect their means-tested benefits.
If your loved one is vulnerable or lacks capacity, you also need to think about:
the risk of financial abuse
whether the disabled person can manage money
If you do not provide for a disabled child, your child or social services may challenge your will.
Using a will trust can look after your disabled child in the future and address these issues.
Why trusts for disabled people are important
A trust is a formal legal arrangement. A group of people, known as trustees, look after and when necessary spend the money you have left your child according to your wishes.
Some families leave money to a brother or sister outright on the understanding that they will to look after their disabled sibling. But if the sibling dies, gets divorced or has large debts, they may lose control of the money. You can avoid this by including a trust in your will.
Depending on the size of your estate and the type of trust you use, there may be tax implications. You should discuss this with your solicitor.
Choosing your trustees
When you see your solicitor, think about trustees. Trustees can be:
professionals, such as solicitors or accountants, who'll charge for their services, or
friends and family.
Most solicitors say you should have between 2 and 4 trustees. The more trustees you have, the more difficult administration can be. They must communicate regularly and agree all decisions.
Work out the value of your assets
You should also have an idea of your assets:
how much you are worth
the names and addresses of any people or charities you want to benefit from your will.
The trustees look after the assets, which can be made up of your house, shares, cash or items such as jewellery.
The trustees decide how your estate (amount of land or property) will benefit a group of people or organisations over a period of time. You can, for example, name all of your children and grandchildren, along with favoured charities, as the potential beneficiaries of the trust.
You then leave a separate, private letter with your will addressed to your trustees explaining how you would like to see the trust run. As none of the beneficiaries have a defined share in the trust, they cannot be said to own any part of it. They cannot demand that they are paid their 'share'. As a result of this, the trust will not affect your child’s means-tested benefits. Your letter of wishes can state, for example, that during their lifetime you want your trustees to put your disabled child’s needs first and benefit the other beneficiaries later. The letter is not legally binding on your trustees who must exercise their discretion.
Disabled person’s trust
This is another type of trust called a disabled person’s trust. It has tax advantages over a discretionary trust. It may be more suitable where there are very substantial assets. Your child will need to meet certain conditions to qualify for this type of trust. Your solicitor will be able to confirm whether your child can qualify.
If your child receives income or capital from a trust, above certain limits, the local authority may assess their ability to contribute. This could mean their means-tested benefits or care package could be reduced or withdrawn.
It makes sense for the trustees to buy items your son or daughter needs and pay for holidays direct from the trust so that they do not count towards any benefits.
Costs of employing a solicitor
Costs vary depending on where you are in the country and your solicitor. When you see your solicitor, discuss potential costs. It's important to have peace of mind and to understand what you are committing to pay.
Find a solicitor
The Law Society has a list of all solicitors in the UK and the areas they specialise in.
Which type of trust?
This depends on your circumstances and those of your child or loved one. Your solicitor will explain both types of trust to you in more detail and guide you to the right choice for you.
Your trustees must undertake certain duties like keeping records of trust assets and taking advice to invest funds. Trustees can pay for advice from trust assets. Generally running costs are about 1 to 2% for some trusts. Professional trustees may charge more than this. You should check before appointing them.
Beneficiaries of a discretionary trust
You need to have a group of beneficiaries. You could include other family members, such as nieces or nephews, or favourite charities such as Scope to ensure you have a large enough group of potential beneficiaries. If your child qualifies for a disabled person’s trust, they can be the principal beneficiary.
Choosing Scope as a discretionary beneficiary
We are always grateful to be considered in this way. If we are included as a beneficiary of the trust, we would not normally expect to receive any benefit until after the death of the disabled beneficiary.
What happens to the trust after the death of the disabled beneficiary?
You get to decide what happens. You can, for example, direct that your trustees split any money left over equally between the other beneficiaries that are still alive. Or you can give any balance to charity. It's up to you. You must provide for this in your will by making individuals and/or charities your discretionary beneficiaries.