We often meet clients who are (understandably) feeling stressed and uncertain when thinking about how to provide for a loved one with a disability after they are no longer able to care for them. One way to put your mind at ease and ensure that your loved one’s needs are met is to set up a Disabled Persons Trust.

A Disabled Persons Trust consists of assets such as money, property or investments specifically for the benefit of an individual who meets the legal definition of a disabled person.

What is the legal definition of a disabled person?

The Financial Act 2005, Schedule 1A refers to individuals who are incapable of administering their property or managing their affairs due to mental disorder, or who are in receipt of certain allowances such as attendance allowance, disability living allowance, or the personal independence payment.

The trust provides a stream of income and capital to support your loved one's lifestyle, covering everything from daily living expenses and medical costs. These trusts can be set up whilst you are alive, but are often set up on your death via your Will.

It is important to appoint a trustee you trust to ensure your wishes are carried out effectively. The trustees are responsible for managing the trust’s assets. This includes investing the funds wisely, maintaining accurate records, and filing necessary tax returns. They will be responsible for distributing the funds to the disabled beneficiary. Rules in relation to the distribution are set out in the trust deed. It is important to instruct a qualified solicitor to draft this deed clearly for you in order to avoid ambiguity and to ensure that the valuable tax benefits enjoyed by disabled persons’ trusts can be claimed. In brief, those benefits are a favourable income and capital gains tax treatment (by allowing the trustees to effectively settle tax at the disabled person’s rates) and the avoidance of inheritance tax charges whilst the disabled person is alive.

By setting up a Disabled Persons Trust, you gain the confidence that your loved one will be supported financially as you wish.

If you would like to discuss setting up a Disabled Persons Trust, please feel free to contact any member of our Wealth Management & Taxation Team on 01494 521 301.