Disabled Person's Trust

Hello. British Roses

I've just been through a very similar process setting up a trust for my disabled brother following the death of our parents.  As other people have suggested Renaissance legal are very very good for advice. (the probate forum on money saving expert also has some very helpful knowledgeable people) Make sure you do get expert advice some solicitors are worse than useless even if STEP qualified.  Some suggestions from me below. 

It's more usual in your will to leave your estate to a Discretionary trust,  then your trustees can decide to convert this into a disabled person trust if appropriate.  If the value of the trust is under £325K there is no advantage in a disabled person trust over a discretionary trust.

For IHT you have an allowance of 325k + a Nill rate residence band of £175k. this NRRB can only be claimed if your house is directly inherited and not via a trust.    but best practice is still to leave everything to a discretionary trust. and then your trustees can make a deed of variation for an assignment of £175k worth of the house to your daughter after your death to be able to claim this extra allowance. This won't impact her benefits if she lives there.

The benefit of the discretionary trust is that when your daughter dies it can simply continue for your granddaughter and in fact up to 125 years.   If you left everything to a disabled person trust I understand you would need to have a separate trust for each of them.  and the disabled person's trusts are subject to IHT.

It would give your daughter a conflict of interest if she was both a beneficiary and a trustee.  Imagine your granddaughter once an adult wanted money to buy a car but her mum said no. would that create conflict.  But many people including me do exactly this.

Trusts can feel complicated when you start looking at them but actually once you get your head around all the conflicting information they are not that hard. (thinking of a trust as a tiny limited company helped me).  Good luck and if you have more questions please ask.

Thanks

James

Hello British roses

The trust wording is something your solicitor will include when drafting the will it's frankly paragraphs of complicated Legalise. but basically, if you ask your solicitor to ensure your trustees have permission to transfer the assets of the trust. which should be a standard provision of any trust will.

I would be cautious allowing your daughter to be both trustee and beneficiary if she is claiming means-tested benefits. you can probably get away with it for now as her roles as trustee and beneficiary are considered legally distinct,  but who knows how  DWP will crackdown on things in 10 years time, 

Unless your assets are worth more than £325K I would agree that a discretionary trust is a good idea. but...,

I would recommend getting to a point where you have a good idea of what you want to do, can then either get renaissance legal (or another very experienced trust solicitor to draft your will) or ask them to review your plans.  It will cost you a few hundred pounds but it is well worth it if you can potentially save your children 10 s of thousands, by not overlooking somthing.

Thanks
James