This is a relatively new trust which was created under the Finance Act 2013. It is aimed at protecting individuals classed as having a severe disability from directly receiving an inheritance and the subsequent negative impact on their benefits.
It is a discretionary trust so there must be two or more beneficiaries as a starter. However, there is a main beneficiary – the disabled person and then the others.
What’s its benefits?
- It doesn’t affect the disabled person’s benefits.
- Most of the assets have to be for the use of the disabled person
- Unlike other trusts it isn’t taxed every year nor when you withdraw assets unlike other types of trusts
- It only lasts for the duration of the disabled persons life and it’s then distributed to others as your Will dictates e.g. other children or grandchildren
- You have five years from the disabled person’s death to sort out distributing the trust’s assets before the HMRC look to hit you with taxes.
- Only £3000 or 3% per year, whichever is the lower, can be given to the other beneficiaries.
Limitations?
- Subject to Inheritance Tax of 40% on anything over £325k.
To be fair, that’s not much of a downside. This still means that the disabled person can be left a significant amount or a home to live in without getting the HMRC interested.
This is a really useful way of leaving a disabled person a significant amount of assets without causing them any problems with their benefits.
How do I do it?
Simples! Get in touch and we can write your Will to take care of you disabled relative with all the above benefits and possibly a few more.
