Disabled Beneficiaries’ Trusts

Trusts are widely used to protect assets, and their use is of significant importance where Beneficiaries are suffering from a disability or are otherwise vulnerable. For example, when a person’s chosen Beneficiary is in receipt of means-tested benefits, it is essential that a Disabled Beneficiaries’ Trust is set up before the death of the Testator.

Most often the sums of money involved are not large and, if benefits are lost, will not give any real advantage to the person receiving the inheritance, other than a short break from benefits and a lot of forms to fill in further down the line. In many cases though, the Beneficiary might well be worse off when they inherit because the Testator did not put in place the correct Trust.

Some people find the support they have been receiving to get their life back on track after a period of severe mental illness, homelessness, addiction, or a combination of these is withdrawn because they will no longer be eligible to receive benefits following an inheritance.

Since the upper capital limit for means-tested benefits, above which a claimant has no entitlement, is £16,000 for a single person or a couple, even reasonably modest inheritances can cause problems.

Some people are not particularly concerned about means testing, but have other reasons for wanting to leave funds to their chosen Beneficiary in a Trust. Their relative may suffer from a condition, such as bipolar disorder, that could render them liable to spend excessively at certain stages of the condition; have current or previous addiction issues; be vulnerable to pressure from less-than-well-meaning associates or family members; or might just not be good with money.

The definition of a disabled Beneficiary?

A ‘disabled person’ is defined as a person who is:

  • by reason of mental disorder within the meaning of the Mental Health Act 1983, incapable of administering their property or managing their affairs;
  • in receipt of attendance allowance;
  • in receipt of a disability living allowance by virtue of entitlement to the care component at the highest or middle rate;
  • in receipt of personal independence payment by virtue of entitlement to the daily living component;
  • in receipt of an increased disablement pension;
  • in receipt of constant attendance allowance; or
  • in receipt of armed forces independence payment. 

Where a property is involved and/or a significant sum of money, it is essential where one of your Beneficiaries qualifies as disabled under the above list, that you discuss with us the best way of protecting them with the use of a Disabled Beneficiaries’ Trust after you have gone.