Planning for the future of a loved one with a disability requires careful thought, particularly when it comes to making financial provision for them. Whether you're a parent, relative or carer, ensuring that your loved one is supported without compromising their entitlement to means-tested benefits or exposing them to financial risk is essential. There are several ways to offer financial support while protecting their interests, both during your lifetime and through your Will.

Using trusts to protect benefits

One of the most effective ways to provide for a disabled relative is through a trust. Trusts allow assets to be held and managed by you or people you trust on behalf of your loved one. This means that the funds are not included in the individual’s personal estate, so they will not be taken into account when calculating their entitlement to means-tested benefits and state-funded care. It will also avoid them receiving large lump sums, which could place them in a vulnerable position. 

Two common types of trusts used in these circumstances are:

• Discretionary Trusts – These offer flexibility, allowing trustees to decide how and when the funds are used. The person with a disability is named as one of several potential beneficiaries, and a Letter of Wishes can guide trustees on how you wish for the funds to be used, without being legally binding. These trusts can be particularly useful if you wish to provide for more than one individual.
• Vulnerable Person’s Trusts (Section 89) – The individual with a disability is named as the principal beneficiary of the trust, and the extent to which other people can benefit from it is limited. While trustees still have discretion as to how and when the funds are used, the trust can benefit from more favourable tax treatment.   

Both of these trusts can be set up during your lifetime as a vehicle into which funds can be added by you or other family members to provide for the individual. Alternatively, a trust can be included in your Will and only come into effect after your death to receive assets from your estate. Either way, specialist advice is essential to ensure the arrangement suits your family’s needs.

Helping with decision-making

If your loved one needs support to manage their finances, there are tools available to help:

• Lasting Powers of Attorney (LPA) – An LPA allows an individual to appoint someone to make decisions or act on their behalf. These can be decisions in relation to both property and finances and health and welfare. However, an LPA can only be made by a person who has the mental capacity to understand what the LPA is and its consequences, meaning some people may never be able to put an LPA in place.
• Deputyships – If an LPA isn’t possible, a Deputy can be appointed by the Court of Protection to manage a person’s finances or, in very limited circumstances, welfare decisions. This process is more complex and is usually reserved for cases where significant assets or income are involved.

Planning ahead can offer peace of mind and ensure your loved one is supported and protected when you are no longer able to do so. If you would like advice about how best you can provide for your family’s needs, please do not hesitate to contact me.