Setting up a trust for a disabled loved one
By writing a will and setting up a trust, you can provide a family member or friend with a disability with financial support and protection after your death.
Setting up a trust will also ensure that a loved one with a disability continues to receive their means-tested state benefits, but still receives any family inheritance.
What is a trust?
A trust is a binding arrangement under which a person gives money or property 'upon trust' to another person or persons, who are known as trustees. The value of the trust fund should be at least £10,000.
Setting up a trust means the money you are leaving to a disabled or incapacitated family member or friend is controlled by the trustees, thus taking any responsibility from the person you have left the money to.
It is also a way of avoiding applications to the Court of Protection for a deputy to be appointed to deal with their finances if they are not able to manage looking after the money themselves.
By putting money into a trust for a person with a disability, you can make the money available for them in their lifetime should they need it for normal living expenses and holidays, equipment or healthcare.
You can also state where the money should go on their death, for example to your other children or family members, or to charity.
If an adult with a disability is, or is likely to be, entitled to means-tested state funding in the future, they can be a beneficiary of a discretionary or a disabled person’s trust.
This means the money that they get from the trust fund will not be included when they are being assessed. This is not the case for all trusts – so it’s particularly important that you discuss with your solicitor the type of trust you want to set up and how it might affect someone’s right to state funding.
The trustees use the trust fund for the benefit of an individual or group of individuals, who are known as beneficiaries. You can either create a trust in your will, which means it will start on your death, or you can set one up in your lifetime.
You should appoint at least two and no more than four trustees. Choose people who are capable of coping with the responsibility and work involved, and get their agreement before appointing them.
At least one trustee should not be a family member or a beneficiary of the trust to avoid any potential conflict of interest in the family.
Normally trustees will be family members; friends; professionals (such as your solicitor or accountant); a specialist trustee company (such as the Mencap Trust Company Ltd); and institutions (such as your bank’s trustee service).
If you choose to appoint a professional trustee, agree their charges for acting as a trustee in advance.
Instructing the trustees
If you decide to set up a trust, you should leave the trustees a signed 'letter of wishes', explaining:
- the reason for setting up the trust;
- guidance on how the trust fund should be used to help or protect your child with a learning disability;
- how the remaining trust fund should be distributed after your child’s death, for example to other family members or to your favourite charities.
While such a letter will not be legally binding on your trustees, it can be referred to for guidance.
Consider putting a copy of the 'letter of wishes' and the names of the trustees in your Lifebox so that on your death the second keyholder (usually your executor) will access the letter and begin the process of setting up the trust.