How to pass on wealth is an important consideration for Will writing or estate planning where beneficiaries may be classed as vulnerable due to a disability, where certain benefits are awarded, or mental health condition meaning they are unable to manage their own affairs. Mental health conditions for this purpose are accepted to include:
- Alzheimer’s or other forms of dementia
- Bipolar disorder, schizophrenia or other mental illnesses
- Autistic Spectrum Disorder
- Learning disability such as Downs syndrome
- Other illness or brain injury that causes psychological, cognitive or behavioral disorders.
On occasions it may be prudent for an inheritance of funds provided under a lifetime gift to be held on Trust for an individual rather than them owning the underlying assets outright. This may be due to requiring assistance with financial management or to preserve any means tested assistance that might be lost due to any inheritance outright. The trust offers flexibility that funds or a property held within the trust can be made available for the individual as circumstances develop over their lifetime but because they do not own the underlying trust fund, the management of the fund is left to others and any benefits are not lost.
The Government also recognises that in certain circumstances, the utilisation of a trust to support a vulnerable person is beneficial and to that end provide these trusts with special tax and inheritance tax benefits that otherwise might make them prohibitive.
A trust of this nature is commonly created in a Will so that it takes effect on your death when a inheritance may have passed outright to the individual. On occasions however, it may be prudent for an inheritance of funds provided under a lifetime gift to be held on Trust for an individual rather than them owning the underlying assets outright.
Fundamentally a trust is a holding vehicle for assets, whether property or finance (or a combination of both) where nominated people have the right to benefit from the assets held in trust but where those assets are managed by trustees who are appointed at the creation of the trust.
Where a property is held under a trust, there may be a provision for a beneficiary to occupy that property or where the trust hold financial assets, there may be the right to provide regular payments to a beneficiary or make ad hoc capital lump sum payments to ensure that funds may be utilised for the benefit of the vulnerable person but in such a manner that their means tested benefits are not lost as they do not own the underlying finances which are owned by the trust.
As the trustees manage the trust asset, it is important to choose your trustees wisely and these may be other family members, friends or professionals. Family members can offer the personal approach whereas professionals with experience of managing trusts to ensure that the obligation of trustees are carried out and to help to avoid the risk of a conflict between close family members and beneficiaries should a disagreement occur, meaning a blended approach of trustee types is often favored.
The trust would also include additional potential beneficiaries who would benefit from any funds left in the trust when the trust came to cessation to ensure that any of the trust assets remaining after the vulnerable persons during lifetime can be distributed in accordance with your wishes.
Where you are considering including a vulnerable person under a Will or making a lifetime provision for a vulnerable person it is essential that you take appropriate advice on the options available to you. Our team of experienced and trusted solicitors can provide you with a no obligation appointment to discuss the options available to you, either in writing a Will or lifetime gifts, to ensure make the right choice based upon your personal circumstances.