Trusts for vulnerable or disabled people
Posted on 1 August 2013
Trusts are often used to make provision for a vulnerable person or for a person who is or may become incapable of managing their own financial affairs. This may be due to mental or physical disability, infirmity, age or other cause.
By creating a trust, the trustees can ensure that the assets within the trusts can be applied for the benefit of the vulnerable person in accordance with the wishes of the person who created the trust (known as “the Settlor”) whilst at the same time the assets are ring-fenced from third parties.
Choosing the right people to act as trustees is crucial as they will have discretionary powers over the trust assets. The Settlor may be a trustee and we have found that a combination of family and experienced professionals works well as it ensures that the trust is administered both with technical expertise and an understanding of the needs of the beneficiaries.
If the trust is properly administered, the vulnerable person will be able to enjoy the assets of the trust and keep their entitlement to means-tested benefits. If the assets were given directly to the vulnerable person such means-tested benefits would almost certainly be lost.
Trusts have come under significant attack from the Revenue, particularly after 22 March 2006. However, trusts for vulnerable and disabled people still attract special inheritance tax, capital gains tax and income tax treatment and it is important that the available reliefs are not overlooked as these can often mitigate or altogether alleviate the tax which might otherwise be payable on the creation of the trust and during its administration.
There is no one-size fits all arrangement and each trust must be tailored to the circumstances at hand and flexibility is often the key to providing peace of mind.
Posted in: Trusts & Tax Planning