Advice on disabled persons discretionary trust fund

[Violet50]

Hello, I am looking at opening a discretionary trust fund for my 22 year old daughter. I would be grateful for any advice on the best trust to go for, thank you

[SpeedyH]

As I understand it, a Disabled persons trust Fund and a Discretionary Trust Fund are two different types of Trust Fund. A Disabled Person's Trust Fund has tax advantages I think and the disabled person is usually the sole beneficiary. However, this means that the money 'belongs' to the person and is treated as such ie it is included as savings in any kind of financial assessment or means test. So not a good choice if your daughter receives any kind of benefits.

A discretionary Trust fund has a 'class' or number of beneficiaries on paper of which your daughter would be one. The Trustees then use their 'discretion' as to how the money is used. You set up a 'letter of wishes' that says the money should be used for your daughter and although this isn't legally binding as long as you appoint trustees whom you can trust, this isn't a problem. The important thing is that with this type of trust, the money doesn't belong to your daughter and so won't affect her benefits. Mencap do workshops on Trusts and their helpline will be able to point you in the right direction

[MontyCat]

Hi. I am in the process of setting up a Disabled Persons Trust for my daughter - definitely this is the better option as regards tax. However, I am not aware of any impact on benefits with this type of trust - we are setting it up with a title that does not identify my daughter. There seems to be only one bank (Cater Allen) which will set up a trust bank account. Good luck!

[1946timmy]

We set up a discrestionary trust some years ago , my daughter and niece are the trustees and our letter of wishes explain how we would like any money used for the benefit of our beneficiaries , my son being one.I attended a talk about wills run by Mencap years ago. We were advised this is the best way to protect our son’s finances. SS will try and take money otherwise to pay for his care. I would also talk to Mencap for advice.

[TimBsDad]

My understanding, and I could be wrong, is that any type of Trust can be a Disabled Persons Trust. All it requires is that the Trustees can complete a form for HMRC saying that there is only one beneficiary, who meets the definition of disabled, and that during the life of this beneficiary nobody else is entitled to the assets/income of the Trust (other than a de minimis amount). This does not preclude other people being beneficiaries after the death of the disabled person. So a Discretionary Trust can be a Disabled Persons Trust if it is written in a manner that gives Trustees the discretion to decide when to make payments to, or for the benefit of, the disabled person. As there is discretion trust assets/income are not the assets/income of the person for benefits purposes. However distributions from the Trust to the disabled person could be income and could affect entitlement to benefits. Mencap can give you advice, and they can manage a trust for you if you are happy for any funds to be donated to Mencap after the death of your daughter. Search "Mencap Disabled Persons Trust".

[wazzy22]

The tax advantages of a discretionary disabled persons trust are minimal and probably outweighed by the fact that the interest rates offered by those banks that do offer trust accounts are low - particularly as the inland revenue staff themselves give inconsistent and incorrect advice about claiming tax back as they themselves don't understand their own rules. The advantage of a trust is that, if properly set up, the funds are protected from inclusion when social services do an assessment. Our bank recently stopped offering a trust account and we had to look around to find another. The only one we could find was Virgin Money but they required a complicated letter from a solicitor to say where the funds had come from and to certify that the trust document was properly set up. Get a Mencap recommended solicitor to set the Trust up. Good luck.

[Violet50]

Thank you for all your replies, that is a great help

[Maurice_Mencap Partner]

Hi Violet50 , as others have mentioned in this thread, the Mencap Trust Company would be able to offer some help with this.

You can read more about what they offer and find guidance about setting up a trust on their website here: mencaptrust.org.uk/

Hope that helps. 🙂

[Charlie2750 Community friend]

Hello Violet50 I am also interested so just now I went to HMRC to have a look and browse which is/was very useful so best thing to do look at the GOV website at HMRC trust and estates. I f you set up a trust for 2 people then you have to state who is the vulnerable person and only that bit qualifies for special tax treatment. Someone else reported that a trust can be both for vulnerable (by definition they need to be having certain benefits) and discretionary which means the trustee can decide what money to give but provided the trustee are not profiting from tax evasion(I think I read that). It all seems at first glance like a minefield but it needs reading thoroughly.

Good luck

[Violet50]

Thank you for replying. It definitely all seems confusing but will get there