How Disabled Person Trusts Compare To Other Trusts

At Blackstone Solicitors, we understand the importance of providing tailored legal solutions to meet the diverse needs of our clients across England and Wales. One area that often requires specialised attention is the establishment of trusts, particularly for individuals with disabilities. In this article, we will explore how disabled person trusts compare to other types of trusts, highlighting their unique features, benefits, and considerations.

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Understanding Trusts

A trust is a legal arrangement where one party, known as the trustee, holds and manages assets on behalf of another party, the beneficiary. Trusts can serve various purposes, including estate planning, asset protection, and providing for loved ones. There are several types of trusts, each designed to meet specific needs and circumstances.

What is a Disabled Person Trust?

A disabled person trust, also known as a disability trust or special needs trust, is specifically designed to benefit individuals with disabilities. These trusts are established to ensure that the beneficiary’s needs are met without jeopardising their eligibility for means-tested benefits, such as Disability Living Allowance (DLA) or Personal Independence Payment (PIP).

Key Features of Disabled Person Trusts

1. Means-Tested Benefits Protection: One of the primary advantages of a disabled person trust is that it allows the beneficiary to retain eligibility for means-tested benefits. The assets held in the trust are not considered when assessing the beneficiary’s financial resources, ensuring they continue to receive essential support.
2. Tailored to Individual Needs: Disabled person trusts are highly flexible and can be tailored to meet the specific needs of the beneficiary. This includes provisions for medical care, education, housing, and other personal requirements.
3. Trustee Discretion: Trustees have the discretion to manage and distribute the trust assets in a manner that best serves the beneficiary’s interests. This flexibility ensures that the beneficiary’s changing needs can be accommodated over time.
4. Protection from Creditors: Assets held in a disabled person trust are generally protected from creditors, providing an additional layer of financial security for the beneficiary.

Comparing Disabled Person Trusts to Other Trusts

To better understand the unique advantages of disabled person trusts, it is helpful to compare them to other common types of trusts.

Bare Trusts

A bare trust, also known as a simple trust, is one where the beneficiary has an absolute right to both the income and capital of the trust. The trustee’s role is limited to managing the assets until the beneficiary reaches a specified age, typically 18.

• Flexibility: Bare trusts offer limited flexibility compared to disabled person trusts. Once the beneficiary reaches the age of majority, they gain full control over the trust assets.
• Means-Tested Benefits: Assets in a bare trust are considered part of the beneficiary’s estate, potentially affecting their eligibility for means-tested benefits.
• Tax Implications: Bare trusts are subject to different tax rules, which may not be as favourable as those for disabled person trusts.

Discretionary Trusts

Discretionary trusts provide trustees with the authority to decide how and when to distribute the trust assets to the beneficiaries. This type of trust is often used for estate planning and asset protection.

• Flexibility: Discretionary trusts offer significant flexibility, similar to disabled person trusts. Trustees can adapt the distribution of assets based on the beneficiaries’ needs and circumstances.
• Means-Tested Benefits: Like disabled person trusts, discretionary trusts can be structured to protect the beneficiary’s eligibility for means-tested benefits.
• Beneficiary Rights: Beneficiaries of discretionary trusts do not have an absolute right to the trust assets, which can be advantageous in protecting the assets from creditors and ensuring long-term financial security.

Interest in Possession Trusts

An interest in possession trust provides the beneficiary with the right to receive income from the trust assets, while the capital remains in the trust for future beneficiaries.

• Income Rights: Beneficiaries of interest in possession trusts have a right to the income generated by the trust assets, but not the capital. This can provide a steady stream of income for the beneficiary.
• Means-Tested Benefits: The income received from an interest in possession trust may affect the beneficiary’s eligibility for means-tested benefits.
• Asset Protection: The capital in an interest in possession trust is protected for future beneficiaries, which can be beneficial for long-term estate planning.

Establishing a Disabled Person Trust

Setting up a disabled person trust requires careful planning and legal expertise. At Blackstone Solicitors, we guide our clients through the process to ensure that the trust is established correctly and in accordance with the beneficiary’s needs. Key steps include:

1. Identifying the Beneficiary’s Needs: Understanding the specific needs and circumstances of the beneficiary is crucial in designing a trust that provides the necessary support.
2. Selecting Trustees: Choosing the right trustees is essential for the effective management of the trust. Trustees should be individuals or entities that the settlor trusts to act in the best interests of the beneficiary.
3. Drafting the Trust Deed: The trust deed outlines the terms and conditions of the trust, including the powers and responsibilities of the trustees, and the rights of the beneficiary.
4. Funding the Trust: Determining the appropriate assets to place in the trust is an important consideration. This may include cash, investments, property, or other valuable assets.
5. Ongoing Management: Regular reviews and management of the trust are necessary to ensure that it continues to meet the beneficiary’s needs and complies with legal requirements.

Conclusion

Disabled person trusts offer a unique and valuable solution for individuals with disabilities, providing financial security and preserving eligibility for means-tested benefits. When compared to other types of trusts, disabled person trusts stand out for their flexibility, tailored support, and protection from creditors. At Blackstone Solicitors, we are committed to helping our clients navigate the complexities of trust law and establish trusts that provide lasting benefits for their loved ones.

How we can help

We have a proven track-record of helping clients create Trusts. We are a multidisciplinary firm and have all the expertise inhouse to satisfy the most exacting requirements of our clients. We will guide you through all the necessary legal due diligence in a comprehensive and timely manner. We firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.

How to Contact Our Wills and Probate Solicitors

It is important for you to be well informed about the issues and possible implications of creating a Trust. However, expert legal support is crucial in terms of ensuring your wishes are met as you would want them to be.

To speak to our Wills and Probate solicitors today, simply call us on 0345 901 0445, or click here to make a free enquiry. We are well known across the country and can assist wherever you are based. We also have offices based in Cheshire and London.

Authored by Ben Posted in Blog, News Tagged as

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