Wills and Trusts Service

A Disabled Persons Trust (DPT) also known as a Vulnerable Person’s Trust, is a trust which is usually set up for the benefit of a family member who has a disability or learning difficulties.

A DPT protects vulnerability as well as means tested benefits and support.

If your loved one is vulnerable or lacks capacity, setting up a DPT, can ensure that your child or family member’s future needs are protected in a tax-efficient way, whilst making sure any means tested benefits, they are currently receiving are not at risk of being stopped in the event of your death.

Families tend to think that because their loved one is disabled, and because there is a tax efficient trust called a Disabled Persons Trust, it must be the right choice for them. However, there are a number of factors that need to be considered before deciding which type of Trust to use, depending on your family circumstances. This includes the age of the disabled or vulnerable person, the nature and the long-term prognosis of any disability and the value of assets transferred into the trust. The needs of the family member who has a disability or learning difficulties will also need to considered, for example, where they are likely to live, who will care for them, how the carers will be compensated and the needs of other family members.

Whilst a DPT can offer potential tax advantages the savings in tax depend on a number of factors. This includes; the size of the taxable estate, the level of the beneficiary’s other income and the value of the trust fund, as well as how long the fund is likely to run for, and how it will be managed and used.  Whilst Affinity Trust offer a DPT option different conditions apply to each type of DPT and need to be tailored to suit each person’s individual circumstances. We strongly advise potential settlors to seek specialist legal advice to talk through their family circumstances and discuss all their options when considering including a trust of this nature in their Will.

Yes. The main advantage of a DPT over a Discretionary Trust is the favourable tax treatment it receives for Inheritance Tax, Income Tax and Capital Gains Tax. A DPT can be a tax-efficient solution when passing on assets to your beneficiaries, ensuring they’re not left with a large inheritance tax bill. Their entitlement to state support or benefit isn’t affected by their inheritance, for example disability support or help with care home fees. A common way to create a DPT is to incorporate it into your Will. This can give you peace of mind that your beneficiaries will be taken care of after you are gone.

In order to qualify for the favourable tax treatment, the Trust must provide that during the disabled person’s life, the income and capital will be entirely used for the benefit of the disabled person. This is subject to a small exception that either £3,000 or 3% (whichever is the least) of the value of the trust fund (either income or capital) can be applied to another beneficiary of the Trust in each tax year. If these conditions are met, the Trust will not incur any charges to Inheritance Tax when payments are made from the Trust and the ten yearly Inheritance Tax charges incurred by a Discretionary Trust will not apply.

The role of trustees

Trustees are the legal owners of the trust fund and responsible for the assets (which might include money and/or property) held in trust. They are legally bound to deal with the trust fund in accordance with the terms of the trust as set out in the Will. They manage the trust and make decisions as to how the trust fund is managed and spent.

You need between 2 and 4 people to be trustees. When considering who to appoint as trustees it is useful to have a mix of people, including:

• One or two younger family members or friends who know the disabled person well, are fully aware of their needs, understand what is important for their quality of life

and are concerned with their welfare

• One or two adults who are able to manage money and capable of dealing with the administration of financial matters

Choosing an unpaid relative or friend or a paid professional

Non-professional trustees, perhaps a relative or friend who knows the disabled person well, cannot charge for their time and are entitled only to expenses. Parents need to be aware of the possibility that a conflict of interest where trustees are also family members and beneficiaries of the trust. Professional trustees are usually solicitors but can also be an accountant or trust corporation. If appointed they will require payment for their time, usually met as an expense out of the trust. You may wish to pay a professional trustee if you want a trustee who knows how to manage a trust legally or you do not have any family or friends that you think could manage a trust well.

A will trust is an arrangement which comes into effect on your death, granting the named trustee’s control over assets on behalf of others (called the ‘beneficiaries’). You might specify what the trust provides each beneficiary, or let the trustees have discretion over how and when they distribute funds.

It’s possible to create both a Will and a Trust, and in many cases, they’ll complement each other. However, if there are any issues or conflicts between the two, the Trust will normally override the Will – not the other way around.

By appointing a qualified solicitor https://solicitors.lawsociety.org.uk/

Or finding free or affordable legal help https://www.citizensadvice.org.uk/law-and-courts/legal-system/finding-free-or-affordable-legal-help/

Alternatively, using our trusted partner Bequeathed https://www.bequeathed.org/affinitytrust

Led by a former solicitor and an accountant, bequeathed provides its unique will-writing software to over 140 UK based charity’s. All legal advice is provided by one of its accredited firms (“Legal Firms”) or by its own in-house legal team to ensure there is always advice available. Legal firms are either regulated or run by a solicitor who is regulated by The Solicitors Regulation Authority (SRA), the regulatory body for solicitors in England and Wales or by a Trusts & Estates Practitioner who is subject to the STEP Code of Conduct and Code for Will Preparation. Each legal firm has a minimum of £2m professional indemnity insurance. Bequeathed is registered with both the Fundraising Regulator and the Information Commissioner’s Office.

The exact cost of setting up a DPT will depend on how much legal advice you will need and how long it will take your solicitor to draft the precise wording. The average cost of creating a simple trust in the UK is in the region of £1,000 – £1,500. Affinity Trust have negotiated a preferential rate for the families we support with our trusted partner Bequeathed as follows:

• For a single Will a one-off payment of £700 including VAT
• For a mirror Will a one-off payment for a couple £900 including VAT