I have a client who has an eight year old with learning disabilities. In her view, it is not entirely clear the extent this will impact on him when he is older. Although I have explained the benefits to her of having a Vulnerable Persons Trust in her Will but she doesn’t want the additional cost and prefers to see how he is as gets older. She is putting the age of inheritance as 25 in her Will. He is her only child and would take 100% of her estate.
My question is that if she dies before he is 25 and does not get around to reviewing the Will, then will her trustees be able to take any action to protect the estate for him beyond 25 / set up a trust for him that would give him the protection he may need (if he meets the criteria for this at some point)?
Thanks
Does the mother realise that if she does leave all her assets to her child outright rather than in a discretionary trust (I am not really familiar with Vulnerable persons trusts, they have always looked to be more bother than they are worth on the rare occasion I have looked although things may have changed), then he may well lose some if not all of his entitlement to benefits that he would otherwise keep.
At the moment, receipts from a discretionary trust do not count in assessing means tested benefits. The loss in benefits would quite possibly outweigh the costs of running a trust. Has she also considered that as someone with learning disabilities he is at an increased risk of being taken advantage of by the unscrupulous when he comes into his inheritance and it may soon disappear.
A Re Pilkington style trust may be possible using the statutory power of advancement, if doing so would be for her son’s benefit.
I would however say from a practical point this may require the trustees to obtain counsel’s opinion and is certain to incur additional costs to the estate. It would therefore be better if the testator put steps in place during her lifetime, but there would be a solution available if she does not.
It is possible for the trustees of such a trust to exercise the power of advancement under sec 32 Trustee Act (I assume the will would extend it to the whole of the fund) so as to extend the trust into one which gives greater protection to the beneficiary- the main criterion being that the trustees believe that it would be for the benefit of that beneficiary. This looks rather high-handed and I think the trustees would have to consider their reasons rather carefully before taking a step which runs directly contrary to the terms of the will. The authority is a House of Lords case Pilkington v IRC [1964] AC612
I have a current trust with a similar problem, but with teenage beneficiaries both of whom have severe learning difficulties and are and will always be incapable. My clients are considering an alternative in which they do not exercise the power of advancement but wait for a deputy to be appointed and put the trust fund under the control of the Court of Protection. There is a case Re HM [2011] EWCOP B30 which debates the relative merits of deputyship versus private trust, and in that case the private trust narrowly won, but where the funds are modest and the incapacity likely to be lifelong, I think deputyship would and should win.
Thanks Sara - yes I have definitely made her aware of the loss of benefits issue and potential exploitation from others. It’s a risky approach she is taking to save a few pounds now unfortunately.
Kind Regards
Claudine Jackson
Trent Wills & Estates