Wills and Vulnerable Beneficiaries

Will beneficiaries can be vulnerable for many reasons, including but not limited to learning difficulties, illness, and addiction.

How do we provide for a vulnerable, possibly dependent adult Beneficiary in our Will?

The beneficiary’s vulnerability is not as important as their care needs, and the solution is known as a Vulnerable Person Trust.

Vulnerable Person Trust

A common occurrence is where a Testator (the person arranging their Will) wishes to leave an inheritance for a beneficiary who is vulnerable in nature and often unable to manage their own finances for many different reasons.

This is where a Vulnerable Person Trust (VPT) ensures that vulnerable beneficiaries, without the capacity to manage their own finances, can be maintained and supported indefinitely by our estate instead.

You can appoint a Trustee or Trustees (people chosen by the Testator to administer a Trust on a continuing basis and could be family members, friends, carers, a professional company, etc.) with any inheritance being held by the Trustees in order to fund appropriate care, upkeep, and maintenance for the vulnerable beneficiary.

How does a VPT work?

Care does not only take the form of cash and everybody has differing care needs. Trustees will consider the most appropriate solutions for the problems which a vulnerable beneficiary faces.

For instance, a vulnerable individual may not possess a concept of money or be able to recognise its value, but they may have the capacity for shopping and feeding themselves. Therefore, the Trustees of a VPT could dispense finance to a vulnerable beneficiary in the form of vouchers. These can often be limited to specific value, products, or services to avoid the risk of unnecessary or inappropriate purchases by a vulnerable individual, yet they can retain their independence as much as is appropriate to serve their best interests.

Money is managed by a Trustee or Trustees, and they use their discretion to assess the best way to provide a benefit for the vulnerable beneficiary. There is flexibility in such VPTs, as well as structure and security to ensure that a vulnerable beneficiary is protected.

Tax benefits of a Vulnerable Person Trust

A VPT usually provides attractive (and sometimes preferable) tax benefits to almost all other types of protective trusts. Such benefits include reduced levels of Income Tax, Capital Gains Tax (CGT) and Inheritance Tax (IHT).

Who would be deemed to be a Vulnerable Person?

Legislation has made this flexible enough to encompass those genuinely in need of care, whilst ensuring that such an arrangement avoids being abused. A vulnerable beneficiaries for whom a VPT would be created will need to satisfy one or more of the following requirements:

Be a person by reason of mental disorder within the meaning of the Mental Health Act 1983, incapable of administering their own property or managing their own financial affairs; and/or

Be a person in receipt of Attendance Allowance; and/or

Be a person in receipt of a qualifying Disability Living Allowance care component at the highest or middle rate; and/or the qualifying mobility component at the higher rate; and/or

Be a person in receipt of disability assistance for children and young people by virtue of entitlement to:

The care component at the highest or middle rate; and/or the mobility component at the higher rate; and/or

Be a person in receipt of a personal independence payment F4, an increased disablement pension, constant attendance allowance, or an armed forces independence payment.

For further information on how to protect an inheritance for a vulnerable person in your Will, WITHOUT fear of consultation fees or obligation, please visit TRF Wills.