Using Trusts to Protect Vulnerable Loved Ones in Your Will

When making a Will, most people focus on who will inherit their estate, but how they inherit it is just as important, especially for a vulnerable or disabled loved one. Simply leaving them money outright may not be the safest or most effective option and here's why:

Challenges with Financial Management

A vulnerable individual may find it difficult to manage money responsibly, which can leave them open to financial exploitation or lead to poor financial decisions.

• Impact on Means-Tested Benefits
  An inheritance could affect their entitlement to means-tested benefits, potentially reducing or eliminating the financial support they rely on or currently receive.
• Risks of Informal Arrangements
  Entrusting someone else to manage the money on their behalf, without a formal structure in place, carries significant risk. There is no legal obligation for the funds to be used as intended, and no protection if things go wrong.

How Trusts Can Help

Trusts provide a legally binding way to protect your assets and ensure they are used for the benefit of your chosen person. While trust law can be complex, the concept is simple: you place assets into a trust, managed by your Trustees, for the benefit of someone else.

Simply leaving money to a friend or relative in the hope they will use it to support a vulnerable person offers no legal guarantee they will do so. However, by setting up a trust in your Will, that same friend or relative, now acting as a Trustee, will be legally required to manage the assets solely for the benefit of the vulnerable person.

Trusts can be created during your lifetime or through instructions in your Will. When included in a Will, the trust comes into effect on your death and is legally enforceable.

Types of Trusts for Vulnerable Beneficiaries

Several types of trusts can help protect vulnerable loved ones. The right choice depends on your circumstances, so expert legal advice is essential.

Discretionary Trust

A flexible option often used for young or financially vulnerable beneficiaries.

• Trustees control how and when funds are used.
• Beneficiaries do not have direct access to funds, reducing risk of misuse or exploitation.
• Assets usually do not affect means-tested benefits.

Vulnerable Person’s Trust

Specifically designed for individuals with disabilities or qualifying vulnerabilities.

• Protects benefit entitlements by ringfencing assets.
• May offer favourable tax treatment not available to discretionary trusts.
• Two main types:
  • Set up in a parent’s Will for children under 25.
  • Created during lifetime, or by Will, for a disabled person.
    These trusts are typically used solely for the beneficiary during their lifetime, with remaining assets possibly passing to others after their death.

If you have a loved one who is vulnerable or living with a disability, including a trust in your Will can offer reassurance that their financial future will be secure. A well-structured trust not only protects their inheritance, but also helps preserve access to means-tested benefits, without depending on others to carry out your wishes informally.

Although this area of law can be complex, the right legal guidance ensures that everything is set up correctly and tailored to your individual circumstances. For personalised advice and support, please contact our Private Client team who will be more than happy to assist you.