For the purpose of receiving means-tested government assistance, a Disabled Person’s Trust (also known as a Special Needs Trust) established for the benefit of another person does not impact that individual’s eligibility for such benefits. What may be included in the category of “covering expenses” is money for housing, food, and care fees. There is a potential tax benefit for trusts that help those who are especially vulnerable. In this article, Setting Up A Trust For A Disabled Person, we take a look at these issues in more depth.
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What is the purpose of a special needs trust?
Many people can benefit from establishing a trust, but those who are in need yet lack the mental capacity to manage their own funds may find it especially useful. Trusts established for the benefit of individuals with disabilities are adaptable to meet the changing needs of those who will benefit from them. You can establish a trust either during your lifetime or in your Will to take effect after your death.
How do you set up a trust for a disabled person?
You should seek expert legal advice when establishing a trust and choosing the correct trust for your personal and family needs because a trust is a legal document.
What you put into the Disabled Person’s Trust will be dependent upon your own circumstances, but it can be anything of value (real estate, stocks, money, etc.). The timing of the transfer of these assets into the trust is up to you. But, once property is transferred to a trust, ownership passes to the trustee. The Trustees are in charge of them.
It’s possible to have non-disabled people benefit from a Disability Trust as secondary beneficiaries, but the trust’s primary beneficiary must be someone with a disability (such as other children or family members). The Trustees have extensive discretion over which beneficiaries will get benefits and how much those benefits will be. The beneficiaries of a discretionary trust have no direct right to the trust’s assets but are still entitled to receive dividends from the trust. Beneficiaries will be able to continue receiving government-funded, needs-based assistance thanks to the trust fund.
Several taxes, such as those on income, inheritance, and capital gains, may have an effect on trusts. Nonetheless, the trust may be eligible for a tax break if the beneficiary is disabled. Under certain conditions, the trust can nevertheless protect assets for the benefit of a disabled beneficiary while minimising tax liability.
You should look to establish the Trust now rather than waiting for it to inherit your property after your death for three key reasons:
You, as the Trust’s creator, will likely serve as its first trustee. When assets are transferred into the Trust, a lot of paperwork must be processed. Doing the reporting and bank account opening process now can save the future Trustees from having to do so after your death when the Trust’s assets come into the Trust.
You should consider Inheritance Tax planning if you are in a position where Inheritance Tax would be due in the event of your death. If that’s the case, you may want to start transferring assets into the Trust right away so that they’re shielded from Inheritance Tax following the required seven-year waiting period.
You may be footing the bill for your child’s therapies, holidays, and other extras while waiting for the probate procedure to play out. As time passes after a person’s passing, their estate remains frozen. The term “probate process” is frequently used to describe this procedure. If that’s the case, your loved ones will have to wait until probate is over and your estate’s assets are distributed before they can afford to keep up with the bills. That may take months, and during that time, your child won’t be able to participate in any of the fun activities for which you’re paying. If your child’s possessions are already in a Trust, you can spare them the additional emotional strain that would result from this situation.
After deciding which assets to contribute to the Trust, you must next transfer those assets to the Trust’s Trustees. In order to accomplish this, you must finalise the papers required to hand over legal title to the Trustees.
If you want to transfer shares into the Trust, you’ll need to fill out a stock transfer form, and if you want to transfer property to the Trust, you’ll need to fill out a Land Registry Transfer and register it.
Who qualifies for a special needs trust?
The beneficiary of a special needs trust must be a person with a disability. A disabled person is defined as someone who meets any of the following criteria:
Someone who, due to a “mental condition” as defined by the Mental Health Act of 1983, is unable to manage his own finances or take care of his own needs. Among the mental disorders recognised by HMRC are the following:
- Various forms of Dementia (e.g. Alzheimer’s).
- Mental illnesses include bipolar disorder, schizophrenia and depression.
- Disorders on the Autism Spectrum.
- Difficulties in learning, such as those caused by Down syndrome.
- Injuries to the brain and Parkinson’s disease but only if they lead to behavioural and cognitive abnormalities.
To satisfy a “benefits test,” a person needs to be eligible for at least one of the following benefits (even if they aren’t really receiving them):
- Disability pension known as the Personal Independence Payment.
- Allowance for constant attendance.
- Independence payment for the Military Services.
How we can help
We have a proven track-record of advising upon all aspects of private client work. We will guide you through the process and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting.to incorporate, what kind of ownership
How to Contact Our Private Client Solicitors
It is important for you to be well informed about the issues and possible implications of setting up a Trust for a disabled person. However, expert legal support is crucial in terms of ensuring a positive outcome to your case.
To speak to our Trust 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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