Caring for Vulnerable Beneficiaries

Preparing for the future is a challenging topic for all parents, especially when considering financial planning for vulnerable children. The thought of them needing support from others for the rest of their lives can be daunting. However, by following a few simple steps, you can implement plans that provide peace of mind and ensure your child is safe and cared for in the future.

1. Get a will

Creating a will is crucial in financial planning for vulnerable children. Dying intestate (without a will) can lead to significant complications, as your vulnerable child will likely inherit directly from your estate. This could jeopardize their eligibility for means-tested benefits and complicate assistance from family or friends without incurring costly and stressful Court of Protection and Local Authority interventions. A will allows you to appoint trusted individuals to take over immediately in the event of your passing.

2. Add trust arrangements to your will

Incorporating trust arrangements into your will is an effective way to protect your child’s inheritance and ensure it aligns with their needs and capabilities. This not only safeguards their means-tested benefits but also lets you designate trusted friends or family to help manage their financial matters. While you can set up a trust during your lifetime, it can be significantly more expensive compared to establishing a trust through will writing services. For instance, DL Wills offers to include trust arrangements in your will for as little as £275, whereas a lifetime trust can cost up to ten times that.

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

There are various trust arrangements you can add to your will. Here are two popular examples:

A Vulnerable Person's Trust (VPT) or Disabled Trust is tailored for managing assets left to your child with minimal tax implications. VPTs also qualify for the Residence Nil Rate Band allowance in your will, similar to a direct gift to a child. To qualify, your vulnerable child must receive means-tested benefits like PIP.

A Discretionary Trust (DT) is more complex to operate but is favored by many families for its broader protection. DTs can support multiple vulnerable beneficiaries simultaneously and help prevent inheritance tax, preserving assets for future generations. While DTs don’t qualify for the residence nil rate band, this aspect can be managed elsewhere in your will.

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

While your will addresses what happens after your death, it is equally important to consider what occurs if you become temporarily or permanently incapacitated due to an accident or illness. Without a lasting power of attorney, your finances—including joint accounts—become frozen until the costly deputyship process is approved. This can take months, adding unnecessary stress to an already difficult situation for your vulnerable child. Establishing a Lasting Power of Attorney allows your chosen person(s) to manage your finances on your behalf, avoiding the Court process entirely. You can also create an LPA for your health matters if desired.

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 will guide you through all options relevant to your situation and help you make the best decisions for your family, with no obligation.