You can provide for the protection of a disabled or vulnerable person in your Will. One way to do this is to establish a Vulnerable Persons Trust for that person, which will allow them to receive financial support without affecting their eligibility to government benefits. Looking after the interests of someone who cannot and may never be able to control their own finances is certainly a time when using a trust can be very valuable.
A Vulnerable Persons Trust can be created as part of your will and can be funded with assets from your estate. You can name a trustee to manage the trust and make distributions to the vulnerable person for their care and benefit.
A vulnerable person's trust is a type of trust that is designed to provide financial support and protection for a person who is deemed vulnerable, such as a minor or an individual with a disability or mental incapacity. This type of trust is often established by a parent, grandparent, or legal guardian to ensure that the vulnerable person receives proper care and protection after they pass away.
The primary purpose of a vulnerable person's trust is to manage and safeguard the assets intended for the beneficiary. The trustee appointed to manage the trust will be responsible for distributing the trust assets in a way that best supports the beneficiary's needs, taking into account factors such as their age, health, and overall well-being.
Trusts can be taxed punitively but when they have a vulnerable election there are exemptions and allowances meaning the trust assets are taxed no more onerously than if the vulnerable beneficiary held the assets themselves. However because the trust holds the assets and they don’t belong to the beneficiary they won’t disqualify the beneficiary for any means-tested benefits.
Like any other trust, a vulnerable person's trust must be carefully structured and administered to ensure that it complies with applicable laws and regulations as well as ensuring it receives special tax treatment. It's important to work with an experienced Estate Planner who specialises in estate planning and trusts to create a trust that meets the unique needs of your loved one. An Estate Planner can also advise you on other options for protecting your child, such as guardianship, depending on your specific situation.
