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How do I set up a Disabled Person’s Trust?

22.11.17

In previous blogs we have covered what a Disabled Person’s Trust is, how it can be used to benefit a disabled person and the advantages and disadvantages of this type of trust. A Disabled Person’s Trust (which some people may refer to as a ‘disabilities trust’) to recap, can only be set up for people who meet the specific definition of disabled. This is usually someone who is in receipt of Attendance Allowance, the care component of Disability Living Allowance at the middle or high rate or Personal Independence Payment (PIP).

Setting up a Disabled Person’s Trust

So now we know what a Disabled Person’s Trust actually is how do you go about setting one up?

A trust is a legal document so it’s important to seek the right legal advice when setting up a trust and selecting the right trust for your own individual and family circumstances.

Deciding on what you place into the Disabled Person’s Trust is also dependent on your individual circumstances, but this can include property, shares, cash etc. You can decide when these assets should go into the trust (see Activating the Disabled Person’s Trust section). However, once you place assets in the trust they are no longer yours. They are under the care of the Trustees.

Starting the Trust

You have set up a Disabled Person’s Trust. It’s likely that you have set this up with £10 in it and you may now like to add other assets into it.

 There are three main reasons for starting the Trust now rather than waiting for it to take assets on your death:

  • Getting the Trust up and running – you will probably have chosen yourself as the Trustees.  As we will explain, there is quite a lot of work to be done when assets come into the Trust.  Rather than leave this to be done once you’ve died and assets come into the Trust, you may like to do the reporting and bank account opening work now, thus saving the new Trustees from having to do this when you have died.
  • Inheritance Tax planning – you might be in a position where, if you died now, Inheritance Tax would become payable.  If that is the case you might like to consider putting some assets in the Trust now, which, after 7 years have passed, will be fully exempt from the Inheritance Tax calculation.
  • The probate process delay – you are probably paying for things personally for your child, maybe therapies, nice holidays, days out etc.  When you die, your estate is frozen and it takes some time to release your assets.  This is often referred to as ‘the probate process’.  If that is the case then there will not be any cash assets to continue paying for these things until the probate process is completed and assets released from your estate.  That could take months and during this period all of the nice things that you are paying for your child to do will cease.  By having assets in the Trust now you can avoid this happening and putting your child under any more stress at what already will be a very distressing time.

What do you do now?

Once you have decided what assets you would like to give into the Trust you need to make that gift to the Trustees. To do this you will need to complete any paperwork necessary to transfer ownership from you to the Trustees.

For example, if you are gifting shares into the Trust you will need to do a stock transfer form and if you are transferring property to the Trust you will need to complete and register the Land Registry Transfer.

Reporting a Disabled Person’s Trust to HMRC

The Trust should then be reported to HMRC.  This process is fully digital and is called the Trust Register.

To do this you will need to have all of the information about the Trust to hand, including:

  • the National Insurance, passport or driving licence number of each of the trustees; and
  • the name, address, date of birth and National Insurance number (or passport number) of any individuals named in the Trust.

HMRC will then issue a unique tax reference number. If you have a Disabled Person’s Trust you can then complete form VPE1 and send this to HMRC claiming the Vulnerable Person’s Tax Election. This secures the favourable income and capital gains tax treatment of the Trust.

Investment advice

Around this time consideration should be given to taking investment advice as to how the Trust assets are invested.  You ought to consider taking advice from a professional who specialises in trust investments.

Irrespective of what is done, a Trustee Bank account should be opened as you might need to make more frequent cash-type payments or pay cash to a beneficiary.

Yearly review

At least once a year the Trustees need to review matters such as:

  • The investment strategy;
  • The needs of the beneficiaries;
    • How they have used assets over the past year and how they will be using them over the next year;
  • Tax Return(s);
  • Preparing Trust accounts;
  • Updating the Trust Register; and
  • Making sure all legal papers are in order.

Getting assets out of the Trust

At any time when assets are to come out of the Trust the Trustees need to:

  • Document the request received for assets to be used or      applied for the benefit of a beneficiary;
  • Consider it, make a decision and log this decision on a Trustees’ Resolution; and
  • Complete a Deed of Appointment to get assets out of the Trust to be used for the benefit of any beneficiaries.

Want more information?

Refer to our Disabled Person’s Trust information sheet here: https://www.renaissancelegal.co.uk/resource/trusts-for-disabled-vulnerable-people/

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48 Responses to “How do I set up a Disabled Person’s Trust?”

  1. Hopton Smith says:

    I want to set up a vulnerable persons trust for my nephews, one adult one child they meets the criteria, i want to transfer my home that i live in as my permanent residence to be used as a rental investment for the trust. I believe that it’s value is approximately 320,000 pounds will i be liable for any tax? if i am how much. additionally i want to fit an assessable patio door to the garden would it be wise to fit it now before sale or after? in terms of value increase concerns?

    • It is possible to set up a Trust to benefit your nephews, however depending on how you wish to do this there may be tax implications that need careful consideration. We would need to understand more about your individual circumstances in order to give specific advice. We strongly advise that you take specific legal advice.

  2. Gareth Boyes says:

    My nephew and niece, who are adults and have learning difficulties, are each to receive an inheritance of approximately £7,500, from their uncle who recently died. Their parents are no longer alive. The Local Authority make provision for their care i.e. my nephew is in supervised housing with full time carers and my niece is in Foster Care. Each has limited mental capacity and would not understand how to manage this money, or would not know if they were being taken advantage of financially. They are Vulnerable Adults.
    There are five surviving brothers and sisters who are also beneficiaries to the estate of their deceased brother.
    Can a Trust be set up to protect my nephew and nieces Inheritance?

    • Katherine Miller says:

      Thank you for your query. It is difficult to give you a clear answer on this without knowing a bit more about the circumstances. We would firstly need to know the terms of the inheritance i.e. was there a Will and, if so, what are the terms of the Will? If the Will has certain provisions then it may be possible to use a trust. If not then a trust could be set up by your nephew and niece if they had the mental capacity to understand this and put the necessary arrangements in place. From what you have said this may not be possible and, if that were the case, the inheritance would need to be managed by a Deputy appointed by the Court of Protection. In some cases the Court of Protection can authorise the setting up of a trust if this were the best option but a Deputy usually has sufficient powers to manage the money in a suitable way. Please do get in touch to discuss your situation further, info@renaissancelegal.co.uk

  3. Gareth Boyes says:

    Can a trust be set up for beneficiaries of a Will, who are vulnerable adults with Mental Health problems, after the Benefactor has died.

  4. Gareth Boyes says:

    Can a trust be set up for beneficiaries of a Will who are vulnerable adults with Mental Health problems after the Benefactor has died.

    • Katherine Miller says:

      Thank you for your comment, we believe we’ve answered your query above.

      • Gareth Boyes says:

        Thank you for your reply.
        There were no specific conditions in their uncles Will, other than they were to receive their
        deceased father`s share of the estate. i.e the Estate was to be split between 5 surviving brothers and sisters and. and the children of the two non-surviving brothers and sisters.

        • Katherine Miller says:

          From the information you have given it appears that the gifts to your nephew and niece are absolute gifts and, therefore, the only action that can be taken is by them (or someone legally appointed to act on their behalf). As previously mentioned, if they don’t have the mental capacity to deal with the inheritance then a Deputy will need to be appointed by the Court of Protection.

  5. Mrs Dean says:

    I have 2 daughters one has special needs and meets criteria for disabled persons trust. Do I need to set this trust up now before something happens to myself or husband . Also a relative is going to leave the girls a sizeable amount of money upon their death . Our house we want the girls to have my daughter who has special needs wants to carry on living in the property and her sister will move in to look after her at the moment this is ok but later on if my other daughter has a family the property would not be big enough so the property would need to be sold and a larger property purchased

    • Katherine Miller says:

      Thank you for your query. We would always recommend putting provisions in place now to deal with your estate if something happened to yourself and your husband. It is very difficult to put the correct arrangements in place once parents have died. It may be that a lifetime Trust is the most suitable option for you, depending on your circumstances and the assets you own. A lifetime Trust can also be used by other family if they wish to leave money to your daughters.

      It is possible to leave your property to the Trust to provide a home for your daughters and this is something that can be explored in detail to ensure that the arrangements will work appropriately. Please get in touch to discuss you own unique situation: 01273 610611 or info@renaissancelegal.co.uk

  6. Kate says:

    Hello, can I set up a bare trust as disabled persons trust for myself and place my home into it? My husband has a pit and he is buying a home with it in the name of the trust. I am disabled myself and we jointly own the house we currently live in and are on means tested benefits. I don’t want to lose my interest in a property so don’t want to sell my home as I never want to be in a position where I am homeless. Once my husband buys his property in the name of his trust we will be regarded as owning two properties and our benefits will stop as we will be expected to sell our jointly owned home which I don’t want to do. I need some form of security. Thank you.

    • Katherine Miller says:

      Thank you for your comment. The situation you are describing is complex and would need careful consideration before giving you a suitable response. Unfortunately we are not able to give legal advice on this blog but please do contact us if you would like to arrange a review meeting: 01273 610 611.

  7. Maureen Bain says:

    My son is in receipt of benefits and I believe would qualify to have a disabled persons trust. I have just written a new will dividing any remaining estate after my death between both my sons and giving my older son full power as executor over my disabled son’s inheritance. If my older son chooses to set up a disabled persons trust can you tell me what will happen to any residual money left in the fund when my disabled son dies. Could for example it be stipulated that any residual money goes to my grandchildren?

    • Katherine Miller says:

      Thank you for your comment. It is usual to include provision within your Will to deal with the distribution of any remaining funds on the death of your son. A provision can be included to ensure that the funds pass to your grandchildren. You will need to check the Will that you have put in place to determine what happens or whether there is flexibility for your older son to make this decision.

  8. Shellie says:

    I want to set up a vulnerable adult trust fund for my auntie as I am an executor of a will. I cannot find a bank or building society to help me, who can I contact to set this up?

    • Katherine Miller says:

      Thank you for your comment, we require more information from you in order to answer this question. I have sent you a separate email regarding this. Thanks Katherine.

  9. Heather Barnes says:

    Our son meets the criteria for a disabled persons trust.

    We understand there are two ways to do it.

    1) Through a Will Trust so a Trust would be created when we die or
    2) Setting a Trust up now and opening a Trust Bank Account with £10 now and leaving money to this trust when we die.

    We think we would prefer to do the second so that it is fully set up before we die.

    Are these types of accounts difficult to find?

    Initially we were thinking ourselves as parents and our daughter could be Trustees, our daughter being able to add another Trustee later when we die.

    We would like to get the Account set up and Tax matters with HMRC sorted out now so our daughter doesn’t have all this to sort when we are gone. All assets going into the trust would be cash. Our son will not be able to live independently.

    Are we correct in our understanding of the second option?

    We know that a form needs to be filled in for HMRC. How easy is this? and does it need to be done every year or is it a one off? Thank you.

    • Katherine Miller says:

      Thank you for your comment, we would need some further information in order to answer your questions. I have sent you a separate email regarding this. Thanks Katherine.

  10. Garry Allen says:

    My elderly sister died recently. Up to 3 years ago she lived with her mentally/physically handicapped daughter who is now 62 years of age. For the last 3 years her daughter has been living in supported accommodation and all her costs are met by social care. Her daughter is not capable of arranging her own finances. I am the Executor of my sisters will and she has asked that I put 40% of her Residue estate into a Trust Fund for her daughter. What would you say is the best Trust Fund to open and where exactly would I open such a fund?

    • Katherine Miller says:

      Thank you for your comment. The type of Trust to be set up will depend on the wording of your sister’s Will. The terms of any Trust should be set out in the Will and, as the Executor, you will need to follow those terms. If you are also appointed as a Trustee under the Will then you, and any other appointed Trustees, will need to decide what you will do with the Trust funds. This is likely to require a Trustee bank account that you will need to open and possibly investment of the funds. You will also need to notify HM Revenue & Customs of the new Trust.

      If the Will does not include provisions for a Trust and your sister has left an inheritance directly to her daughter then a Deputy will need to be appointed by the Court of Protection to manage the funds. More information on applying to the Court of Protection can be found here.

  11. Carrie says:

    My brother meets the criteria for a disability trust fund. He has recently inherited money from a deceased relative and wants to use this cash to buy a house that will serve as a short term housing solution whilst a medical negligence case is going through legal process. Can he buy the house for cash and put the house into the trust? Once his legal case is settled he will sell this short term house and build a fully adapted home using the proceeds of sale plus funds from his case. He is tetraplegic.

    • Katherine Miller says:

      Thank you for your comment. It may be possible for your brother to deal with a property in the way you have suggested but careful consideration will need to be given to the implications of dealing with it in this way. For example, any tax implications and practical issues regarding costs for the property. As your brother is due to receive compensation from a medical negligence claim then we would also suggest considering the options for how these funds can be held in future. There may be a few options open to your brother and he should consider taking advice to make sure any arrangements he makes are most appropriate for him. Please do contact us if you would like to discuss this further.

  12. Theresa Elliott says:

    i need help to set up a trust for disabled sister
    can you help

    • Katherine Miller says:

      Thank you for your enquiry, a member of our team will contact you directly. Thanks Katherine.

  13. Amin Miah says:

    I need to speak to a trust solicitor.

    • Katherine Miller says:

      Thank you for your enquiry, a member of our team will contact you directly. Thanks Katherine.

  14. Steve Hill says:

    Hi, we have 5 children and the youngest is disabled and would qualify for a Disabled Persons Trust as he is on a number of benifits, PIP, housing benefit etc. When my wife and I die the estate including the sale of the house will be split 5 ways with one share going into the trust. Is a disabled trust the best option and should I be setting it up now rather than after we are gone. One fifth share is likely to be about £75000 in the current market

    • Katherine Miller says:

      Thank you for your comment. For most people it is advisable to set up the Trust now but this will depend on your personal circumstances and the assets you own. A lifetime Trust can also be preferable if there are other family members who may wish to leave a gift for your son. From the information you have given, it would be possible to have a Disabled Person’s Trust but we would need to consider your situation specifically before advising which type of Trust would work best for your family.

      We would be very happy to discuss your situation in more detail so please do get in touch on 01273 610611 or info@renaissancelegal.co.uk

  15. Michelle says:

    Hello, Can I set up a disabled trust for myself? I meet the criteria and potentially am set to receive inheritance from three separate family members. I don’t want to be rude and approach them with this however, I also want to make sure I am protected for my future with Trustees etc in place, Thank you

    • Katherine Miller says:

      Thank you for your query. It is legally possible for you to set up a Trust for yourself. However, the family members would then need to be asked to amend their Wills to leave any inheritance to the Trust rather than to you directly. In some cases, it may be better for the Trust to be set up by one of the people who are planning to leave something for your benefit. The reasons depend on your particular circumstances and what you are trying to achieve. Before setting up a Trust we would always review the situation to determine what would be the best option. Please do contact us directly if you would like advice on your specific situation.

  16. Karen Evans says:

    I have 2 adopted children. One has emotional challenges, and the other who lives me is physically disabled, autistic and has severe learning difficulties.
    I own a house which is worth about £380,000 and has been adapted for my son.What trust is best to ensure the best for both children.
    The house is big enough for my daughter to move in to look after her brother but I’m wondering what are the implications for my son’s benefits/ and if my daughter lost her basic rate job?

    • Katherine Miller says:

      It is difficult to say what type of trust is most suitable for your family without reviewing your circumstances in full detail. We would also consider your daughter’s situation and the issues around your son’s benefits before advising on the best option for you. If you would like us to consider your situation in more detail, then please do get in touch on 01273 610611 or email info@renaissancelegal.co.uk.

  17. Maria says:

    I am disabled and in receipt of benefits.
    My father has died and I am executor
    Can I set up a disabled persons trust so I can actually benefit from my inheritance as per my fathers wishes. I have 2 brothers so the estate would be split three ways

    • Katherinen Miller says:

      Thank you for your enquiry. Before we can confirm whether setting up a trust is the right option for you, we would need to see the terms of your father’s Will (if one was made) as this will determine what can be done. If the Will does not include provisions for your inheritance to be held on trust then you would effectively need to give it away to the trust. This may be considered a deliberate deprivation of assets which would have an effect on any means tested benefits you receive. This is explained further here: https://www.renaissancelegal.co.uk/blog/askrl-disabled-child-left-inheritance-will-affect-benefits/.

      If your father made a Will including some provisions for a trust then we would be able to review this for you and consider your options further.

  18. Allyson Barnes says:

    My nephew has been left £50,000 by his Aunt but he is autistic and does not have the ability to make financial decisions for himself. Unfortunately she did not think to have the money put in a discretionary trust for disabled beneficiaries. I would like to know is it possible to open one of these trusts even though it wasn’t mentioned in the original will. Would it have to be a deed of variation or would we have to get a court of protection order, or is there any other option we have.

  19. Allyson Barnes says:

    My nephew who is autistic has been left money in a will but my Aunt did not leave it to him in a disabled trust fund. I understand from your previous replythat this cannot be done later. If we get a court protection order and appoint a deputy can it then be put into a disabled persons trust so it doesn’t affect his benefits?

    • Katherine Miller says:

      It is possible for a Deputy to apply to the Court of Protection for permission to transfer the inheritance to a Trust and it will be for the Court to decide if this is in your nephew’s best interests. However, it is unlikely to be permitted if the purpose of doing so is to reduce assets in order to continue claiming means tested benefits. This could be considered a deliberate deprivation of assets by the DWP or Local Authority.

  20. Nick Woodroffe says:

    My son is registered as Severely Sight Impaired. He has R.P. Does he qualify as a Vulnerable Beneficiary if I set up a VPE1

    • Katherine Miller says:

      Thank you for your query. It may be possible to set up a Disabled Person’s Trust for your son if he receives certain benefits, in particular, Personal Independence Payment or certain elements of Disability Living Allowance. The full details of the criteria can be found here https://www.renaissancelegal.co.uk/disabled-persons-trust/. Once a Trust has been set up then the Trustees report it to HMRC using form VPE1 which confirms your son’s eligibility for a Disabled Person’s Trust.

  21. chris lam says:

    Hello Have a llearning disabilities daughter lives and cared by us since birth in our family house
    I have a rented property can I transfer half the property into a disabled person trust in my lifetime so that she can have half the rent and contnued to lives in the family house before I am no longer around. And the capital to be inherited by her brother and nephew when she is no longer around. Much appreciated for your advise Thank you Chris

  22. Rhian Boylan says:

    Hi, I have had a solicitor create a disabled person trust for my son who is a vulnerable adult. I have the documentation describing the trust. Do you know any bank or building society where I can open the trust/ account and put some money into it now?
    I am struggling to find somewhere willing to open the trust account.

    • Katherine Miller says:

      Thank you for your comment, a number of banks and building societies do offer trustee bank accounts but we are unable to recommend any specifically.

  23. Doire Lawne says:

    To whom it may concern,

    I am registered disabled with both mobility and mental health. My step dad is my carer and controls my finances to ensure my bills are payed on time and that I don’t overspend during manic episodes. My grandmother passed away and I due to inherite a portion of her estate. I was hoping to get some information on how to set up a trustee account that my step dad has control of to protect me from wasting it. I received pip and esa and don’t want my award to be affected and that I get given money from my trustee only when genuinely needed and have his approval. Can you help with advice and point me in a direction of a company that can open such account please.

    Many thanks.

    • Katherine Miller says:

      Thank you for your comment. From the information you have given, I assume that the gift in your grandmother’s Will is a gift directly to you and not to a trust. If the Will does not include provisions for your inheritance to be held on trust then a trust would need to be created and you would effectively give away your inheritance to the trust. This would allow your stepfather, if he was appointed as one of the trustees, to manage these funds and make decisions about how they could be used for your benefit.

      However, giving away your inheritance in this way may be considered a deliberate deprivation of assets by the DWP and this would have an effect on the means tested benefits you receive. This is explained further here: https://www.renaissancelegal.co.uk/blog/askrl-disabled-child-left-inheritance-will-affect-benefits/.

      You mention that your stepfather controls your finances now and, if he is already appointed as your attorney under a power of attorney, he could help you with managing the inheritance.

  24. M>LALJI says:

    Hi My son is disabled with MS and he is 42 years his own house freehold fully paid.He has no income except state help for carer’s allowances . I am 75 years and would like to prepare Disabled trust deed so that I can
    leave 50% of my house plus cash. He doesnot want to lose benefits from the state but he has daughter and wants to leave all assets to his daughter after she is 21 years old. Can I become one of the trustee,? Once I put my assets in to disabled Trust deed after 7 years I donot need to pay Inherent tax? after my death

    • Katherine Miller says:

      It is possible for you to be a Trustee if you set up the Trust in your lifetime. If you make a gift of your assets to the Trust then this may reduce the value of your estate for Inheritance Tax purposes. However, the rules for Inheritance Tax can be quite complex and would need to be carefully considered before any gifts were made. It is also important to consider whether giving your assets away now is appropriate or whether they can be given to the Trust under the terms of your Will. Please contact the team who would be very happy to speak to you about your specific situation, 01273 610611.



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