Setting up a trust is a popular way of safeguarding sums of money and other assets such as land or property. However, a trust can also be set up by someone who is looking to financially protect and care for their loved ones, both during their life and after they pass away.
At Raeside Chisholm, our lawyers have the knowledge to help you set up any kind of trust. If you require any advice or assistance, please get in touch now on 0141 248 3456 or complete our online enquiry form here.
Who is a vulnerable person?
When setting up a trust, it is important that you choose one that will suit the needs of the person who is to benefit from the trust, also known as the beneficiary. First, it is important to assess the beneficiary's circumstances - are they a vulnerable person?
A person will be classed as a vulnerable beneficiary if they are disabled or a bereaved minor. A disabled person is defined within trust law as a person who is incapable of administering their property or managing their affairs, due to a mental disorder within the meaning of the Mental Health Act 1983 or they receive or are entitled to receive any government welfare allowance, due to their disability. A bereaved minor is a person who is under the age of 18 and who has lost one or both of their parents.
Why set up a trust for a vulnerable person?
A trust can be used to provide financial stability for a vulnerable person throughout their life.
In a trust for a vulnerable person, the assets within the trust such as money, land or buildings can only be used to benefit the vulnerable person. However, the person in charge of the trust (the trustee) still has some discretion regarding how this should be done.
In a trust for a bereaved minor, when the child reaches the age of 18 they must get all of the trust assets, including any money, land or buildings.
Tax
Some trusts for vulnerable people, including Disabled Person’s Trusts and Trusts for a Bereaved Minor are awarded special tax treatment. This is one of the advantages of setting up a trust for a vulnerable person over a standard trust.
Disabled Person’s Trust
A disabled person’s trust is specifically set up with a disabled person as the beneficiary. As long as some relevant criteria are met, this kind of trust will not be subject to inheritance tax in the same way as a normal trust. Instead, it will be treated as if it is owned outright by the disabled beneficiary. This means that trustees will not incur capital gains tax or income tax charges.
Trust for a Bereaved Minor
This kind of trust can be written into a parent's Will. If that parent dies and leaves behind a child (or children) under the age of 18, that child will become the beneficiary of a trust for a bereaved minor.
The trust must provide that all income is paid to the child on or before they reach the age of 18. This kind of trust has an advantage over a standard trust, in that it avoids inheritance tax while the trust is running for the child.
How do I set up a trust for a vulnerable person?
The wording of a trust needs to be precise, so it is important that you seek the help of a qualified solicitor. Our team has a wealth of knowledge in this area and are always happy to help.
You may want to think about who is to benefit from the trust and who is to be in charge of the trust – the trustee.
Trustees
Trustees have to be honest and act in good faith, with the beneficiary's best interests always in mind. You may wish to nominate a trusted family member or a close friend, or you may want to act as a trustee yourself if this is possible under your chosen trust.
Alternatively, you might want to consider nominating a professional trustee, such as a solicitor. Appointing a professional trustee can help ensure that the trust is carried out for its intended purpose. It can also relieve the burden of making sure all tax duties associated with the trust are fulfilled.
Trust Administration Lawyers in Glasgow, Scotland
Our trust administration team has lots of experience managing the day-to-day running of trusts, so take the pressure off yourself and speak to a member of our team today.
Call us now on 0141 248 3456 or complete our online enquiry form.
