Every person is unique and at different times of our lives we can all be considered vulnerable, however in this context ‘vulnerable people’ usually refers to people with complex needs which may include physical, emotional, learning, behavioural, psychological and social challenges or a combination of many of these difficulties, which means they may need more help and support with day to day tasks or dealing with larger one off tasks or life events. The vulnerability may be constant or it can occur from time to time but ultimately it’s likely that the person in question will need some form of support.
How to leave assets to vulnerable beneficiaries?
You may have seen from our Case Studies that this is a question we are asked a lot.
It can create great anxiety to anyone with a vulnerable family member, whether they are a child, a sibling or a partner, the concerns remains the same; who will step in when I’m gone? How will bills get paid? Will they still receive benefits? Can they live at home? How should I leave money to them?
Firstly, yes, you can leave money (or property) in such a way that a vulnerable person can access it, but care should be taken about exactly how access is granted. In the rest of this article we will consider vulnerable people that have little or no personal wealth of their own, but please do not hesitate to contact the Private Client Team at Hugh Jones Solicitors to discuss benefiting vulnerable parties that do have personal wealth of their own as some of the ideas below may still be appropriate.
Incorporate a Trust into your Will
Usually we would recommend a Discretionary Trust; this style of trust gives your chosen trustees a significant amount of power over the trust assets. There must be a group of potential beneficiaries (of which the vulnerable person will be one), the trustees are then able to decide when and how to benefit any of the possible beneficiaries (guided by any note left by you) and if they want they can treat the vulnerable person as the principal beneficiary.
With this style of trust the role of trustees is very important. It must be someone that you can rely on, who you feel is capable of making appropriate decisions and considering the best interests of your possible beneficiaries. We would also expect them to take into account your wishes.
Why use a Trust, why not just name the vulnerable beneficiary in your Will?
A Will is a legally binding document, it instructs someone to distribute your estate to the people named in your Will. This means that the people named are guaranteed any inheritance you have left them (we sometime call this ‘having an absolute right’).
While you may like the idea of a vulnerable beneficiary being ‘guaranteed’ an inheritance when you are no longer around there are some downsides which you should be aware of.
Usually vulnerable beneficiaries are entitled to support from the government in the form of benefits and or support from their Local Authority. Benefits and support from the Local Authority are awarded depending on someone’s needs but also their capital.
You may already be aware that if someone has savings of over £6,000 of their own, any benefits that they are entitled to, which are means tested may be reduced:
If they have savings of between £6,000 and £16,000, a sliding scale will be used to reduce the level of means tested benefits that they are entitled to and if they have capital over £16,000 it is likely that they will not qualify for benefits at all; ESA, Housing Benefits, Universal Credit and Pension Credit are all (wholly or partly) means tested benefits.
So, if a vulnerable person (who had previously been in receipt of benefits and or support from Local Authority) was ‘guaranteed’ an inheritance over £16,000 they could lose their entitlement to certain benefits and would have to use their inheritance for day to day living until their capital drops below the threshold.
Naming a vulnerable person in a group of beneficiaries (who can potentially benefit from a trust) means that any inheritance in the trust is treated separately to any other capital, that they or any of the group of beneficiaries holds personally.
While the vulnerable person won’t be ‘guaranteed’ an inheritance, there would be no reason that your trustees would not consider them before considering anyone else (who is also named as a possible beneficiary). In addition because there is no guarantee that the vulnerable person will benefit, or by how much, then any benefits or funding that they are entitled are unlikely to be withdrawn.
Other benefits of a Trust
You can use the Trust to receive more than just a vulnerable beneficiary’s share:
For example if you have a spouse or civil partner and three adult children but one of your children is vulnerable, you could leave your whole estate on trust; firstly to your spouse/civil partner for them to use for life and then equally between your children:
Leaving it to your Spouse/Civil Partner for life
This means that if your spouse or civil partner was to re marry or enter care, the capital would be saved for your ultimate beneficiaries, e.g., equally between children. It would not be at risk from a second family or being eaten up by high care fees.
Leaving other children’s shares in trust
While you may not have the same worries about other adult children, we tend to make Wills years before we are likely to need them and it’s often impossible to know what will arise in the future. Including a trust in your Will gives your trustees an opportunity to consider any changed circumstances among the beneficiaries at the date of your date - while no doubt it is your intenion for your beneficiaries to become wealthier, there are some situations where this may not be desirable.
If you have any questions about leaving assets to vulnerable people please contact us on 0161 871 3680 for a free initial chat.
Fiona Ludkin is an Associate Solicitor in our Private Client team.