Wills & Trusts for Disabled & Vulnerable Beneficiaries

A disabled persons trust is a trust specifically designed for a beneficiary who meets HMRC's definition of a disabled person — broadly, someone who is unable to manage their own affairs due to a mental disorder, or who is in receipt of certain disability benefits. These trusts receive favourable tax treatment, including IHT and CGT concessions, and can hold assets for the beneficiary's lifetime without affecting means-tested benefits such as Universal Credit, PIP, or local authority care funding.

Potentially yes — if money is left directly to a disabled person, it may be treated as capital for means-testing purposes and could disqualify them from means-tested benefits such as Universal Credit, Housing Benefit, or local authority care funding. The threshold is typically £16,000 in capital. A disabled persons trust or discretionary trust can hold the inheritance for the beneficiary's benefit without it being treated as their capital for means-testing purposes.

A disabled persons trust is a specific type of trust that qualifies for favourable tax treatment under HMRC rules — including exemption from the ten-year anniversary charge and exit charges that apply to ordinary discretionary trusts. To qualify, the beneficiary must meet HMRC's definition of a disabled person. A discretionary trust is more flexible and can be used for any vulnerable beneficiary, but does not receive the same tax advantages. We advise on which structure is most appropriate for your circumstances.

Yes — a trust provides significant protection against financial exploitation. The trustees (not the beneficiary) control the trust assets and make decisions about distributions. The beneficiary cannot be pressured into handing over money, and the assets are protected from creditors. A letter of wishes alongside the trust gives the trustees guidance on how you would like the trust to be administered for your beneficiary.

Trustees of a disabled persons trust should be people who know and care for the beneficiary, understand their needs, and can be trusted to act in their best interests. This is often a combination of family members and a professional trustee. Having at least two trustees is recommended. We advise on the appointment of trustees and can act as professional trustee if appropriate.

A letter of wishes is a non-binding document that accompanies the trust deed and explains your intentions for the trust — including how you would like the trustees to use the trust assets for the beneficiary, what their needs and preferences are, and any specific wishes you have. It is particularly important for a vulnerable beneficiary trust because the trustees need to understand the beneficiary's circumstances to make good decisions. The letter of wishes can be updated at any time without changing the trust deed.

Yes — a disabled persons trust can be set up during your lifetime (a lifetime trust) or through your will (a testamentary trust that comes into effect on your death). A lifetime trust can be useful if you want to transfer assets to the trust now — for example, to reduce your estate for IHT purposes — while ensuring the beneficiary is provided for. We advise on the most appropriate approach for your circumstances.