Trusts for Disabled and Vulnerable People

Our London and Cambridge-based teams are committed to helping families secure the future of their vulnerable loved ones through specialised trusts

Overview

At Culver Law, we are dedicated to providing legal solutions that protect and support vulnerable and disabled individuals. One of the most popular ways of doing this is through specific trusts which target the needs of those who are unable to fully manage their own affairs due to age, disability, or other factors.

These trusts are designed to help dependent individuals receive the care and financial support they need to enable them to have the best possible quality of life, even when the ones they depend on are no longer around.

Types of Trusts for Disabled or Vulnerable People

Disabled Persons Trusts

A Disabled Persons Trust (DPT), often referred to as a Special Needs Trust, is a legal arrangement that allows assets to be held and managed for the benefit of a disabled individual.

These trusts are carefully structured to ensure that the beneficiary continues to qualify for government benefits, for example, Income Support, Employment and Support Allowance (ESA), and Housing Benefit.

Vulnerable Person Trusts

A Vulnerable Persons Trust (VPT), often known as a “Vulnerable Beneficiary Trust” (VBT), is a legal arrangement established to manage assets and provide financial security for individuals who are unable to do so themselves.

This type of trust is particularly beneficial for those under 18 whose parents have died, those with disabilities, and others who may be at risk of financial exploitation or incapable of managing their own finances.

Discretionary Trusts

A discretionary trust is a more generalised type of trust, but it is often used for vulnerable people. Assets or money are placed in a “pot” for the benefit of a group of people, and trustees are selected to manage these funds. Trustees have the authority to decide how the trust's funds and assets are distributed; this flexibility allows the trustees to respond to the changing needs of the beneficiary. However, Discretionary Trusts do not have the same tax benefits as VPTs or DPTs, with Capital Gains Tax charged on trust gains at the rate of 20%.

Qualifying as a Vulnerable Beneficiary

The beneficiary is defined as vulnerable if they are either under 18 and their parents have died, or they are eligible for any of the following benefits:

They are incapable of managing their property due to a mental disorder as defined by the Mental Health Act 1983
They receive Constant Attendance Allowance
They receive Personal Independence Payment (PIP)
They receive Armed Forces Independence (AFIP)
They receive Industrial Injuries Disablement Benefit (IIDB)
They receive Disability Living Allowance (DLA) for adults or Disability Living Allowance for children (either the care component at the highest or middle rate or the mobility component at the higher rate)
They receive Child Disability Payment (Scotland)
They receive Adult Disability Payment (Scotland)

Who Can Become a Trustee?

In the context of trusts for vulnerable individuals, selecting the right trustee is especially important since the trustee will manage the trust’s assets and ensure they are used to support the beneficiary’s needs. Often, family members or close friends are the obvious choice to become a trustee, since they may have a deeper understanding of the beneficiary’s needs. However, solicitors with experience in trust law and special needs planning can be appointed as trustees, bringing legal expertise to ensure that the trust is managed following the law.

The Benefits of Establishing a Trust for Vulnerable People

Establishing a trust for disabled or vulnerable people offers several significant benefits. These benefits include:

Safeguarding Against Financial Abuse:

VPTs or DPTs help protect the beneficiary’s assets from potential exploitation or financial abuse. The appointed trustees manage the assets, ensuring they are used only for the intended purpose, and in the best interests of the beneficiary.

Long-Term Planning:

Establishing a trust provides long-term security, ensuring that the beneficiary is cared for throughout their life, even after the death of family members or carers. The trust ensures that funds are available to meet the ongoing needs of the beneficiary, giving family members peace of mind.

Tailored Financial Management:

The trust can be structured to allow trustees the flexibility to provide financial support as needed, and to adjust to changes in the beneficiary's circumstances. Certain uses of the trust may include paying bills, making investment decisions, and ensuring that the beneficiary’s general needs are met.

Preservation of Means-Tested Benefits:

A properly structured VPT or DPT can protect the beneficiary’s eligibility for benefits, such as Universal Credit, since the assets in the trust are not considered part of the beneficiary's personal wealth. The trust can also help maintain eligibility for housing benefits and social care support by keeping assets out of the beneficiary’s direct ownership.

Tax Efficiency:

VPTs or DPTs benefit from certain tax exemptions, including relief from Inheritance Tax and favourable treatment under Capital Gains Tax. This makes the trust a tax-efficient way to manage and preserve wealth for the beneficiary. By placing assets in a trust, families can also engage in effective inheritance tax planning, ensuring that more of the family’s wealth is preserved for the future.

Registering a Trust

Registering a trust is important so that it is legally recognised and operates in compliance with UK law.

The process of registering a trust follows several key steps:

Determine the type of trust, seeking legal advice to assist in the decision.
Draft the trust deed, including key information about trustees and beneficiaries.
Appoint trustees who are trustworthy and capable - they must formally accept their role.
Transfer assets to the trust, such as cash, property or investments.
Register the trust with HMRC through the Trust Registration Service (TRS).
Register the trust for tax purposes, submitting annual tax returns.

How Can Culver Law Help?

Our team at Culver Law provides comprehensive support in establishing and managing trusts for vulnerable and disabled individuals. Some of the typical ways we help families include:

Trust Creation and Management: Culver Law can draft and establish a trust that meets your specific needs, ensuring that it is legally sound and structured to provide maximum benefit to the vulnerable individual. We also offer ongoing support in managing the trust.
Expert Legal Advice: Our team has extensive experience in trust law and special needs planning. We also understand the complexities involved in setting up trusts for vulnerable individuals, including the legal requirements and tax implications.
Trustee Selection and Support: We provide advice on the responsibilities of trustees, ensuring that those chosen are capable of fulfilling their duties effectively. If needed, Culver Law can provide or recommend professional trustees to manage the trust.
Protection of Beneficiaries: Our team helps to protect the trust’s assets from financial exploitation and mismanagement, ensuring that they are used exclusively for the benefit of the vulnerable person. In the event of disputes, we are prepared to defend the trust.

Why Choose Culver Law?

When it comes to establishing and managing trusts for vulnerable and disabled individuals, Culver Law stands out as a trusted partner. Here’s why people choose us:

Personalised Solutions: We recognise that every family’s situation is unique. Our approach is to provide personalised solutions that are specifically tailored to meet the needs of your family.
Client-Centred Service: We prioritise clear and open communication, ensuring that you fully understand each step of the process. We explain complex legal concepts in straightforward terms so you can make informed decisions with confidence.
Compassionate Approach: We know that planning for a vulnerable family member can be emotionally challenging. Our team approaches every case with compassion and understanding, offering emotional support throughout the process.
Specialised Expertise in Trust Law: We demonstrate expertise in trust law, particularly in the area of trusts for vulnerable and disabled individuals. Our deep understanding of these laws ensures that your trust is established correctly, serving its intended purpose.

FAQs

Can these trusts be supported by a Letter of Wishes?

Yes, VPTs and DPTs can be supported by a Letter of Wishes. This outlines the settlor’s preferences regarding how and when the beneficiaries should receive funds or other assets from the trust.

Are government benefits affected by these trusts?

Government benefits are generally unaffected by VPTs or DPTs, provided they are set up correctly. These trusts are specifically designed to protect the beneficiary's eligibility for means-tested benefits.

What is a vulnerable person election?

A Vulnerable Person Election is a provision in UK tax law that allows a Vulnerable Persons Trust to receive special capital gains tax treatment. When the election is made, the trust can be taxed more favourably, typically resulting in lower tax rates on income and gains within the trust. The trust must meet specific criteria to qualify for this election and the election form VPE1 must be submitted to HMRC.

When should these trusts be created?

Ideally, these trusts should be established as early as possible, either during your lifetime or through your Will, to ensure the needs of a vulnerable person are met without disrupting their financial support.

Contact Our Solicitors In London or Cambridge to Discuss the Best Trusts for Your Family

At Culver Law, we demonstrate a high degree of expertise regarding the most suitable trusts for each individual or family. Please contact a member of our London or Cambridge team to discuss your requirements today.

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Get in touch

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Culver Law, London
44 Southampton Buildings
London
WC2A 1AP
0203 889 0166
Company No. 13313009

Culver Law, Cambridge
9 Hills Road
Cambridge
CB2 1GE
01223 653010

Any information on this website, whilst intended to be accurate, does not constitute legal advice.

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