Caring for Vulnerable Beneficiaries

Preparing for the future is a difficult topic for all parents, even more so when your child is vulnerable.  Knowing that they may need support from others for the rest of their lives can feel a daunting prospect to consider. Surprisingly, however, by following a few simple steps, you can put plans in place to give you peace of mind and ensure your child will be safe and cared for into the future.

1. Get a will

Preventing intestacy (i.e. dying without a will) is particularly important for parents with vulnerable children because, without a will, your vulnerable child will almost certainly inherit from your estate directly, potentially invalidating their entitlement to means-tested benefits, and making it very difficult for any of your family or friends to assist them without expensive and stressful Court of Protection and Local Authority intervention.  Having a will enables you to avoid all those problems and appoint the people you trust to immediately take over when something happens to you.

2. Add a trust to your will

Adding a trust to your will provides a safe, legal method to ensure your child inherits from your estate in a manner suited to their needs and abilities, protecting your child's means-tested benefits and enabling you to appoint your choice of trusted friends & family to immediately assist your child with their financial matters.  You can also set up a trust during your lifetime but this can prove to be a more costly and therefore less popular solution compared to a will trust.  For example, DL Wills could add trust arrangements to your will for as little as £275, whereas setting up a lifetime trust may typically cost 10 times that amount.

3. Which type of trust arrangement is best for my vulnerable child?

There are several types of trust arrangements you can add to your will.  Here are a couple of the most popular examples:

A Vulnerable Person's Trust (also known as a "VPT" or a Disabled Trust) is specifically designed to allow your chosen trustees to manage the assets you leave to your child, with minimal additional tax implications.  Uniquely, VPTs also qualify for the Residence Nil Rate Band allowance in your will, in the same way as a direct gift to a child would.  To qualify, your vulnerable child must be in receipt of means-tested benefits such as PIP.

A Discretionary Trust (also known as a "DT") is slightly more complex to operate but DTs are very popular with many families, as they offer more wide-ranging protection.  For instance they can benefit multiple beneficiaries at the same time, so they are popular for families with multiple protection needs.  A DT is also a good way to prevent inheritance tax on the death of any of your beneficiaries, thus preserving assets for future generations.  DTs do not qualify for residence nil rate band, but that aspect can potentially be taken care of elsewhere in your will.  DTs can also protect benefits, in the same way as a VPT.

4. Get a Lasting Power of Attorney (LPA) Financial

Your will plans for what happens after your death of course but what if you are simply incapacitated, either temporarily or permanently, by an accident or an illness?  In the absence of an LPA, your finances will be frozen - even your joint accounts - until expensive Court permission, known as a deputyship, is granted.  This can take many months, thereby adding unnecessary stress for all concerned, to an already difficult situation for your vulnerable child.  Creating a Lasting Power of Attorney simply enables you to grant permission to your chosen person(s), known as your "attorney(s)" to immediately continue operating your finances if you are incapacitated, thus completely avoiding the Court process.  You can also create an LPA for your Health matters if you wish. 

5. How do I find out what is best for my family?

Click below to book a free 1-2-1 chat with one of our friendly, specialist advisers.  They'll go through all the options in your situation and help you make the very best decisions for your family, without obligation.