Individuals with disabilities and their families often face unique financial challenges. While government benefits can provide essential support, they are often means-tested and subject to changes in eligibility criteria. One way of ensuring your loved one’s future financial security is by setting up a Disabled Person’s Trust (DPT). This blog post will delve into what a Disabled Person’s Trust is, its uses, and how it can help protect means-tested benefit packages for disabled individuals in Scotland.
What is a Disabled Person’s Trust?
A Disabled Person’s Trust is designed to provide financial assistance and security for a person with a disability, while maintaining their eligibility for means-tested benefits. This type of trust allows families to set aside assets for the benefit of a disabled individual without affecting their entitlement to critical benefits.
A Disabled Person’s Trust can also support and protect a person with a disability if they struggle to make decisions about money or property, or if they are at risk of financial abuse because of their vulnerabilities. A Disabled Person’s Trust can be set up during your lifetime or in your Will.
Uses of a Disabled Person’s Trust
- Preserving Benefits: One of the primary uses of a DPT is to preserve means-tested benefits such as Disability Living Allowance (DLA), Personal Independence Payment (PIP), and Employment and Support Allowance (ESA). These benefits are often essential for covering living expenses, healthcare, and other vital services. Assets held within the trust are not counted toward the means tests, ensuring continued access to essential financial assistance.
- Financial Security: A DPT provides a safety net for the disabled individual, helping to secure their financial future. The assets within the trust can be managed by trustees who have the beneficiary’s best interests at heart. This arrangement ensures that the person’s needs are met over the long term, even if their family circumstances change.
- Protecting Assets: The assets in a DPT are protected from creditors and cannot be accessed by the beneficiary’s care home or local authority. This means that the beneficiary can continue to receive their benefits and funding without having to worry about losing their assets.
- Estate Planning: Disabled Person’s Trusts can also be incorporated into estate planning strategies. Families can use the trust to pass on assets to the disabled individual in a tax-efficient manner, while simultaneously protecting their means-tested benefits. This approach enables them to manage their inheritance without jeopardising their financial stability.
Benefits of a Disabled Person’s Trust
- Financial Security and Management: A Disabled Person’s Trust is an effective way to manage your loved one’s financial affairs. It ensures that funds are appropriately allocated for their care, medical needs, and overall well-being. This structure prevents sudden changes in financial circumstances that could disrupt their quality of life.
- Long-Term Planning: Planning for the future is crucial, especially when your disabled family member may require ongoing care and support. With a DPT, you can create a comprehensive financial plan that spans their entire lifetime. This ensures that their needs are met even when you’re no longer able to provide direct support.
- Tax benefits: DPTs can offer a number of tax benefits, such as inheritance tax relief and capital gains tax exemption.
- Flexibility: DPTs offer a great deal of flexibility in terms of how the funds can be used. The trust can be tailored to your disabled family member’s unique needs and preferences. Funds can be used for a wide range of purposes, including medical treatments, therapies, educational pursuits, and recreational activities that enhance their quality of life. This can be helpful if the disabled person’s needs change over time.
- Peace of mind: Knowing that your loved one’s financial future is secure can give you much needed peace of mind.
Setting Up a Disabled Person’s Trust
- Consultation: Begin by consulting with legal and financial professionals who are experienced in trusts and disability-related matters. They can help you understand the process, legal requirements, and implications of setting up the trust.
- Choose Trustees: Select trustworthy and capable individuals or organisations to act as trustees. These individuals will manage the trust’s assets and make financial decisions in the best interest of the disabled person. Trusted family members are often an appropriate choice.
- Define Terms: Clearly outline the trust’s purpose, beneficiaries, and how the funds are to be used. This ensures that the trust aligns with your loved one’s specific needs and wishes.
- Transfer Assets: Transfer assets into the trust. This may include funds, property, or investments. You can do this during your lifetime or direct your trustees to hold your estate in trust when you pass away.
- Beneficiary’s well-being: Your trustees should regularly review the trust’s performance and adjust as needed to address changing circumstances and needs.
For families in Scotland with disabled loved ones, the Disabled Person’s Trust offers a valuable solution to the challenge of maintaining means-tested benefits while securing future financial stability. This legal instrument empowers families to protect their vulnerable members and plan for their future without compromising their eligibility for crucial government support.
If you have questions about setting up a Disabled Person’s Trust or need legal guidance tailored to your situation, our team of experienced solicitors is here to assist you. Contact us today to ensure a secure future for your loved ones with disabilities.