When it comes to protecting your loved one’s financial future, particularly those who may be vulnerable due to age, disability, or mental incapacity, there are many legal options to consider. One of the most important tools available in such cases is a Vulnerable Person Trust, also known as a Disabled Person’s Trust. Understanding what a Vulnerable Person Trust is, how it works, and why it can be so valuable is crucial in securing the financial well-being of those who need extra support.
At Blackstone Solicitors, we can assist families across England and Wales in setting up these trusts, and in this article, we’ll explain the key aspects of Vulnerable Person Trusts, their benefits, and how they can safeguard your loved one’s financial future.
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For a free initial discussion on how we can help you deal with the legal implications of creating a Vulnerable Person Trust, get in touch with us today. We are also experienced in dealing with all aspects of Wills and Probate and we will review your situation and discuss the options open to you in a clear and approachable manner. Early expert legal assistance can help ensure you avoid the stress of dealing with these issues on your own. Simply call us on 0345 901 0445 or click here to make a free enquiry and a member of the team will get back to you.
What is a Vulnerable Person Trust?
A Vulnerable Person Trust is a legal arrangement designed to provide financial protection for someone who is considered vulnerable. The definition of a vulnerable person typically includes:
- Disabled individuals who are unable to manage their financial affairs independently.
- Those suffering from mental health conditions that impair their ability to make decisions.
- Elderly individuals who may be experiencing the early stages of dementia or other age-related cognitive impairments.
- Children or adults with severe physical disabilities.
The key purpose of such a trust is to manage and protect assets in a way that ensures the vulnerable person’s needs are met without them having direct control over large sums of money, which they may be unable to manage appropriately.
How Does a Vulnerable Person Trust Work?
A Vulnerable Person Trust works by allowing assets—usually money or property—to be held and managed by trustees on behalf of the vulnerable person. The trustees are responsible for ensuring that the assets in the trust are used to benefit the vulnerable individual in line with the trust’s terms.
Setting up this type of trust involves three main parties:
- The Settlor: The person (often a family member or close friend) who establishes the trust and places assets into it.
- The Trustees: Individuals or professionals appointed to manage the trust’s assets and ensure they are used to benefit the vulnerable person. Trustees can include family members, professionals like solicitors, or a combination of both.
- The Beneficiary: The vulnerable person for whom the trust is intended to benefit.
Once the trust is established, the trustees have a legal duty to manage the assets responsibly and in the best interests of the vulnerable person. This includes making decisions about how the trust funds are spent, ensuring the assets are invested wisely, and dealing with any tax obligations.
Why Should You Set Up a Vulnerable Person Trust?
You may wonder why setting up a Vulnerable Person Trust is necessary, especially if you have already made financial provisions in your will or through other means. However, there are several compelling reasons why such a trust can be a critical part of your financial planning.
- Financial Protection: A vulnerable person may not have the capacity to manage large sums of money, whether due to a mental condition, disability, or age-related impairment. A trust ensures that they are still provided for, without placing them at risk of financial exploitation, mismanagement, or poor decisions.
- Preserving Means-Tested Benefits: Many vulnerable individuals rely on state benefits to cover their essential needs. If they were to receive a significant inheritance or lump sum directly, they could lose eligibility for these means-tested benefits. A Vulnerable Person Trust allows them to continue receiving their benefits while also benefiting from the trust’s resources.
- Avoiding Court of Protection Involvement: Without a trust, the Court of Protection may need to step in to manage the finances of a vulnerable person who cannot do so themselves. This can be a time-consuming and costly process. A trust allows the family or chosen trustees to retain control over financial decisions without needing court involvement.
- Tax Efficiency: Vulnerable Person Trusts are often subject to special tax treatment. For instance, these trusts can benefit from more favourable inheritance tax (IHT) and capital gains tax (CGT) rules compared to other types of trusts. This can help maximise the financial resources available for the care and support of the vulnerable individual.
- Long-Term Security: By setting up a trust, you can be confident that your loved one will be taken care of, even if you are no longer around to provide direct support. This ensures that their future financial needs are met according to your wishes.
How to Set Up a Vulnerable Person Trust
The process of setting up a Vulnerable Person Trust may seem complex, but with the right legal advice, it can be straightforward and highly effective. At Blackstone Solicitors, we guide families across England and Wales through each step of the process. Here’s an overview of the key stages involved:
- Assessing Eligibility
First, we help you determine whether your loved one qualifies as a vulnerable person under the law. The eligibility criteria must be met to ensure the trust receives the favourable tax treatment available for Vulnerable Person Trusts.
- Choosing the Right Trustees
Choosing the right trustees is a critical part of the process. Trustees must be individuals or professionals you trust to act in the best interests of the vulnerable person. This could include close family members, but it’s often advisable to also include a professional such as a solicitor, who can provide expert management and oversight.
- Deciding on the Trust’s Terms
We work with you to set out the specific terms of the trust. This includes determining how the assets will be managed, what restrictions or conditions may be placed on their use, and how decisions will be made by the trustees.
- Drafting the Trust Deed
The trust deed is the legal document that establishes the trust. This needs to be carefully drafted to ensure that it complies with all legal requirements and reflects your wishes. At Blackstone Solicitors, we draft tailored trust deeds that meet your unique family circumstances.
- Transferring Assets into the Trust
Once the trust deed is in place, assets such as money, investments, or property are transferred into the trust. These assets are then owned by the trust, to be managed by the trustees for the benefit of the vulnerable person.
- Ongoing Trust Management
After the trust is established, the trustees are responsible for managing the assets and distributing funds as necessary for the care and support of the vulnerable person. We can provide ongoing advice to ensure the trust is administered in compliance with legal requirements and in a tax-efficient manner.
Common Misconceptions About Vulnerable Person Trusts
There are a few misconceptions about Vulnerable Person Trusts that can cause hesitation when considering setting one up. Let’s clear up some of the most common ones:
- “It’s only for the very wealthy.”
While Vulnerable Person Trusts are often associated with large estates, they can be highly effective regardless of the size of the estate. Even modest assets can benefit from the security and tax advantages that a trust offers. - “The vulnerable person will lose control of their money.”
It’s true that the trustees control the assets in the trust, but this is precisely to ensure that the vulnerable person is protected. The trustees act in their best interests, and the trust’s terms can provide flexibility for how funds are used to meet the beneficiary’s needs. - “It’s too complicated.”
Setting up a trust may seem daunting, but with professional guidance, the process is manageable. Our team at Blackstone Solicitors can simplify the process and ensure that everything is handled correctly.
How we can help
We have a proven track-record of helping clients create Trust. 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.
Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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