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Disabled Beneficiary
Many adult children with learning disabilities are often unable to understand the ‘value of money’. They may also be open to abuse from family members, friends, and others who are able to persuade the vulnerable child to release their potentially significant inheritance. This often worries the parents of these children - who are correctly concerned that their child may fritter away their inheritance.
Tax Break Incentive
The Government also acknowledge that people with learning disabilities are rarely given the same opportunities in work that an able-bodied person has. The Government therefore incentivise parents to leave money to their disabled child by granting tax breaks for monies held in trust for the disabled beneficiary.
Definition
To qualify for these tax breaks the beneficiary must meet the criteria set out in the legislation. See article to the right.
The Solution
To protect a vulnerable child a specialist discretionary trust (a disabled persons trust) should be considered by the parent.
This trust allows the parent to appoint trustees that they trust will look after their child’s money, and for the trustees to decide when to release monies from the trust fund to the disabled person. This element of additional control provides protection for the disabled person from possible abuse, while still providing monies for the disabled person.
And assuming the criteria is met (regarding the beneficiary being ‘disabled’) the trust fund will benefit from the tax breaks available.
The Next Step
In our Home-Visit Will-Writing Service we will discuss with you the benefits and drawbacks of including any trust in your Will, including a Disabled Persons trust.
For more information please contact us.
How to protect a disabled child
Parents of children with special needs often want to:
- provide protection for a disabled beneficiary; and
- take advantage of the allowable tax break
after their death. There Will can provide the vehicle for doing so.
Single Beneficiary per Trust
In the Finance Act 2013 the legislation stipulates that to qualify as a ‘disabled persons trust’ the trust must name just one named beneficiary.
Prior to this legislation it was common practice to include a range of people (including the disabled person) as potential beneficiaries and providing that at least 50% of the trust fund was used for the disabled person’s benefit the whole trust fund would qualify for preferential tax treatment.
Definition ‘Disabled’
The Finance Act 2013 introduced a broader definition of ‘disabled’ person. The definition now includes people in receipt of:
- PIP (daily living component at the standard or enhanced rate)
- Constant attendance allowance
- DLA (care component at the highest or middle rate)
- Attendance allowance
- Those incapable of managing their own affairs because of a mental disorder as defined in the Mental Health Act 1983.
Time Limits Apply
To claim the special tax treatment for a vulnerable person (That is someone who is either a minor child or disabled) form VPE1 must be completed and submitted to HM Revenue and Customs.
Time restraints apply.
More information is available here.