Vulnerable Person Trust

Vulnerable Person Trusts

What is a Vulnerable Person's Trust?

If you have a child or someone else you want to provide for who is disabled in some way you may be worried about how you can ensure their needs are met way after you are gone.

Leaving something to them directly can cause problems if they are in receipt of means tested benefits, or if they aren’t mentally capable of managing an inheritance themselves.

Some people opt to leave assets to another relative in the hopes that they will use this to support the vulnerable person. While this sounds like a nice idea unfortunately there is no guarantee that this will work! The person you leave assets to may start out with the best intentions, but if they become bankrupt, divorce, or die then that money that was meant to be used for the vulnerable person is now lost.

The Vulnerable Person’s Trust is there for you in this situation.

For this trust to be appropriate the vulnerable beneficiary must meet some strict criteria set out by statute. At Nene Legal we can work with you can make sure that this type of trust is appropriate and confirm whether your loved one will qualify. We’ll confidently advise you on the benefits of this trust and make sure the necessary wording is included in your Will.

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The Vulnerable Person’s Trust works similarly to the Discretionary Trust with one key difference; the fund MUST be used for the benefit of the vulnerable person.

In your Will you would name the vulnerable person as the ‘main beneficiary’ of the trust. As the trust is still a type of discretionary trust you would also need to name other ‘potential’ beneficiaries too. This could be your other children, grandchildren, other relatives, or even friends or charities.

Although other people are named as beneficiaries of the trust, in reality it has to be used only to benefit the vulnerable person. Your Trustees are given control over how the trust fund is used, so they make decisions about what it is used for, when to use it, and how to use it as long as what they’re doing is for the vulnerable person’s benefit. This means it could be used to pay for their care or therapy, provide them a place to live, fund leisure activities for them, as well as pay for their day to day maintenance.

Once the vulnerable person passes away if there is anything remaining in the trust this can then be shared between the other beneficiaries. It doesn’t last for the 125 years that a Discretionary Trust lasts for since it really is just for the benefit of the vulnerable person.

The Vulnerable Person’s Trust shares a lot of benefits with the Discretionary Trust. But mainly:

  • They are a great way to provide for someone who isn’t able to manage their own
    finances. It allows your Trustees to step in and support your loved one.
  • The Trustees retain control over the assets in the fund. They can make sure it is used for
    the vulnerable person’s best interests. This also minimises the risk of financial abuse.
  • The assets in the trust fund are ignored when it comes to assessments for means tested
    benefits or residential care.
  • The trust can hold a wide variety of assets, not just money. This means that a property
    could be left to the trust, or the trust could purchase a property. Either way, the
    vulnerable person can be provided with a home.
  • The trust wil qualify for special tax treatment. They are treated more favourably for for
    Inheritance Tax, Capital Gains Tax, and Income Tax. This is something we can discuss
    with you if tax is a concern.

Overall this type of trust gives you the peace of mind that your loved one will be looked after
financially once you’re gone, without any worries about a large inheritance causing them any
problems.

Ultimatley the Trustees have total discretion and will make all decisions about managing the trust. But remember, they have to use the fund for the vulnerable person's benefit. We recommend you give your Trustees some guidance on how you want them to manage the trust. This can be done in the form of a ‘Letter of Wishes’, which we can advise on and produce for you. The Trustees should try to follow this letter as closely as they can whenever they are making decisions about how to use the trust.

You can update these wishes at any time without needing to rewrite your will, so don’t worry if you change your mind.

Any trust and Inheritance Tax planning we do for you at Nene Legal must be bespoke to you and your estate. There’s no ‘one size fits all’ when it comes to estate planning so please get in touch with us for a chat about how these trusts can help you.

Speak to our specialist team

Our will writing team is based in Rushden, Northamptonshire. We offer our will writing service in the Northamptonshire, Cambridgeshire and Bedfordshire areas.​.