Providing for a Vulnerable Beneficiary in a Will
You can provide for a vulnerable beneficiary in your Will by creating a Trust. This is often preferrable to leaving money with another relative, as it provides greater protection and control.
Do you have a vulnerable beneficiary?
Do you have a child, sibling, spouse or other relative who relies on you for support? This person might lack mental capacity or have a physical disability. Or there might be another reason why he/she cannot take care of their own affairs. Whatever the circumstances, you might be concerned about what will happen to this person when you’re no longer around. Understandably, you’ll want to make provisions so that your loved one is cared for after your death. The question is: what’s the best way to go about it?
There are a number of options available. If your loved one has mental capacity, then you could name them as a beneficiary in your Will. However, this could impact any means-tested benefits they receive. Inheriting a lump sum of money (or a property) could, therefore, cause more harm than good. Or, you could leave a sum of money with a friend or family member, on the proviso that it will be used to support your vulnerable relative. Yet this also comes with potential problems, as the money could be unexpectedly decimated by divorce, debts or bad-decision making. The money is not legally ring-fenced, so you cannot be certain that it will be used for its intended purpose.
That is why the best option may be to create a Trust in your Will. When you die, your chosen assets are put into a Trust. This is managed by between two and four people known as Trustees. These people will manage the assets on behalf of your vulnerable beneficiary, using the money to meet his or her needs. The money cannot be touched by anyone else until your beneficiary dies. This legal arrangement provides much greater protection and control. There are different types of Trusts that can be incorporated into a Will. Where a vulnerable beneficiary exists, the Trusts you might want to consider are:
- A Discretionary Will Trust
- A Disabled Person’s Trust
Each type of Trust is suited to different circumstances. For example, you can only set up a Disabled Person’s Trust if your vulnerable beneficiary meets the definition of ‘disabled’. Your loved one can be the sole beneficiary. If you have other beneficiaries then they can only receive a limited value of the Trust fund every year, which could be a drawback. On the other hand, if you want to set up a Discretionary Will Trust, then you must have a group of beneficiaries. This can include other non-vulnerable beneficiaries. The Trustees have the discretion to use the Trust to meet each person’s needs. This allows for a lot of flexibility, which may be important if your loved one’s condition is likely to change over time. Another benefit is that the Trust is not taken into consideration for means-tested benefits.
Which Trust should I choose?
The right option depends on your personal wishes, the needs of your vulnerable beneficiary, and the needs of your other beneficiaries (if any). There are also tax implications to consider. For instance, Discretionary Will Trusts attract inheritance tax if the value exceeds the current threshold. There may also be income tax and Capital Gains Tax liabilities. A Disabled Person’s Trust generally has more favourable tax advantages, but only if certain conditions are met. Each factor needs to be weighed up, allowing you to make an informed decision as to what is best for you and your family.
Speak to our Sunderland solicitors
If you have a vulnerable or disabled loved one and you want to provide for them in your Will, contact us to discuss the matter further. We can assess the situation and provide expert legal advice tailored to your circumstances. This provides peace of mind that your beneficiaries will receive the help and support they need, when you’re no longer able to provide it for yourself. To find out more, please call us on 0191 567 7244 and we’ll be happy to help you. If you would rather contact us online, email us at firstname.lastname@example.org and one of our team will be in contact with you shortly.