Vulnerable Person’s Trust
Protecting Disabled Children and Adults in your Will
John has Downs Syndrome. His parents want to make Wills but are not sure what to do. What option would you choose?
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F R E Q U E N T L Y A S K E D Q U E S T I O N S
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What are the tax advantages of a Vulnerable
Person’s Trust?
Inheritance Tax: No ten-year anniversary or exit
charges during the lifetime of the vulnerable person.
Income Tax and Capital Gains Tax: Trustees can
claim a reduction in the tax paid by the Trust.
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Who can benefit from a Vulnerable Person’s
Trust?
To qualify for special tax treatment, the main
beneficiary must be:
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Incapable of managing property or finances due
to mental disorder (Mental Health Act 1983)
or
2. In receipt of any of the following benefits:
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Attendance Allowance,
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Disability Living Allowance (higher or middle rate of care component),
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Personal Independence Payment (standard or enhanced rate for ‘daily living activities’),
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Constant Attendance Allowance,
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Armed Forces Independence Payment or
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Increased Disablement Pension.
HMRC include people with Autistic Spectrum
Disorders, learning disabilities (such as Downs
Syndrome), Schizophrenia, Bi-Polar Disorder and
Dementia.
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Who can I choose to act as Trustees?
Your trustees can be family or friends who are
willing to take on this responsibility and act together.
Alternatively, you may prefer to appoint a professional
trustee for their neutrality and expertise.
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What can the Trust Fund be used to pay for?
Your Trustees have flexibility to make decisions at
the time about how the trust funds are used and
invested. Examples include paying for additional
support, home improvements, holidays and hobbies
as well as expenses for professional advice that may
arise when managing the trust.
You can guide your trustees by providing a letter of
wishes to express any views you may have.
Can anyone else benefit from the Trust?​
The primary beneficiary of the trust will be the
Vulnerable Person but you will also need to name at
least one other person or group of people (e.g. my
grandchildren) or charity who can potentially benefit
from the trust. The trustees will use their discretion
based on needs at the time.
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For the special tax treatment to apply, there are limits
on how much others can benefit annually.
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Does the trust need to be registered with
HMRC?
This type of trust does not have to be registered
with HMRC unless a UK tax liability is incurred. If this
happens, then it must be registered by the trustees
within 90 days of a UK tax liability being incurred.