Trusts for the vulnerable and disabled or mentally disabled are a traditional means of providing for those who may not be capable of managing their own property and affairs.
The legislation for disabled and vulnerable beneficiaries of a trust however can be incredibly complex. If you are considering any form of trust you and your adviser will need to take into account:
- Whether means tested benefits are a primary consideration
- Whether it is preferable to leave matters to another individual, to look after the vulnerable person’s affairs, or in trust
- Whether a trust is preferable to the cost and expense of a court appointed deputy
- Whether property in the trust is to be treated as part of the vulnerable person’s estate for Inheritance Tax (IHT) purposes, possibly triggering a 40% charge on the death of the vulnerable person, or whether the property in trust is to be treated as outside the vulnerable person’s estate subject to the anniversary and exit charges if funds are substantial (considerably more than the nil rate band)
- Income tax and Capital Gains Tax (CGT) transparency – whether a vulnerable person election ought to be made, and the restrictions on the trust generally if the election is made
- The CGT conditions; whether it is intended to obtain the full (rather than one-half) annual CGT relief, and the possible restrictions on the flexibility of the trust if the full annual exemption is sought, and whether the CGT free uplift on death is important
- Whether payments to others from the trust, apart from the vulnerable person, is envisaged
- The purpose of the trust – its purpose should always be the priority, only then one looks at its tax efficiency
How can Linder Myers help?
We advise that you contact Linder Myers as soon as you become aware that you require a trust for a vulnerable, disabled or mentally handicapped individual. We have experience in drafting these trusts and helping our clients negotiate this complex area of law.