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Providing for Vulnerable Beneficiaries

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When making a will, you inevitably have to think about the people you’ll leave behind which can bring with it a certain amount of anxiety as to how they will manage after you've gone, financially or otherwise.

But what if you have someone who is dependent on you, through disability, long-term illness or other incapacity? This can throw up other issues you need to think about carefully when making your will.

It might be that the person is not able to work and is on mean-tested benefits. An inheritance of any size may mean both that any entitlement to DWP benefits will cease, as will the provision of help from the local authority with care costs.

A dependent may not be able to manage money through mental incapacity, or they may be potentially vulnerable to others taking advantage of any new-found source of cash.

If this is a concern, then the inclusion of a trust in your wills can have several advantages. What a trust does is set aside a sum, or a proportion of your estate, to benefit that person. However, they are not entitled to it outright; you appoint trustees to manage the fund for them.  Commonly a discretionary trust is used in these circumstances, which means that your trustees decide what to pay out from the fund and when, and the beneficiary is not entitled to anything until the trustees so decide.

This means payments can be made to benefit that person in a manner that does not affect their means-tested benefits.  For example, one-off payments can be made for the provision of medical expenses, a holiday or adaptations to their home.

The trustees have their ‘hand on the purse strings’ which means that they are not obliged to pay out funds if they choose not to do so, and if they do, payments can be made directly to purchase items and the like.  If appropriate, the person will not be given sizeable sums of cash in their own name, which may render them vulnerable to abuse.

Ordinarily if the beneficiary is not able to handle money, a close relative or friend or sometimes a solicitor would need to apply to the Court of Protection to be appointed as their deputy to be able to manage their funds. This application can be quite lengthy, cumbersome and expensive.  However, if the funds are in a trust, they are always run by trustees and a deputyship order is not required to manage trust assets.

Trusts are complex legal documents and carry with them certain tax implications. If you are considering going down this route, it is important that you seek advice from a regulated solicitor who specialises in this field.  Members of the Society of Trust and Estate Practitioners and Solicitors for the Elderly are used to dealing with such issues and will be able to give you impartial and sensible advice.

If you wish to speak to someone about a trust or any other aspect of making a will, please contact our Private Client team on Lincoln 01522 512123 or Newark on 01636 673743.