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Disabled Discretionary Trusts

If your have a disabled child or beneficiary that you wish to benefit in your will the best way to deal with their inheritance would be to put it into a disabled discretionary trust. Assets in the form of money, property, shares or any other assets can be put into the trust as a way of making long-term financial provision for a disabled child or beneficiary.

The discretionary trust is set up by parents or other relatives as part of their Wills   The trust itself will be a clause in the will and will include the Trustees powers.

The reason a trust is useful is that assets once put in trust do not belong to the "object" of the trust (disabled son or daughter who is intended to benefit). This means that the capital held in the trust is not taken into account when assessing entitlement to state benefits like Income Support or local authority obligations to fund care.

The trust assets will be looked after by a minimum of two trustees (maximum of four) and by setting up the trust the testator is saying who they wish to look after their beneficiary’s assets. In the absence of a trust where the disabled beneficiary is unable to manage their money the Court of Protection will have to get involved and appoint a receiver. This receiver may not be the person the testator wished to look after their beneficiary’s assets.

It is termed discretionary because the trustees appointed to administer the trust have discretion subject to the terms of the trust as to how, when and by whom the capital and interest of the trust are used.

A further defining characteristic of a properly drawn up discretionary trust is that the intended beneficiary e.g. son or daughter belongs to what is termed a "class" of people and is not the sole beneficiary of the trust. Therefore we need to appoint further beneficiaries who would inherit the trust on the death of the disabled child or beneficiary. It is usually envisaged that on the death of the disabled child or beneficiary the trust will end and be divided equally between the remaining beneficiaries.

It is also worth bearing in mind that not to make any provision at all for a disabled son or daughter on the grounds that another member of the family will look after them or that the state will provide for them may not be a wise course. This is because under the Inheritance Act (1975) if insufficient provision is made it is possible for Social Services and the Department of Social Security to challenge the will. In turn this can result in an unpleasant, unhelpful and costly legal dispute.