A Disability Trust is a type of Discretionary Trust, which is a common trust that provides flexibility, by granting the Trustees the discretion on how to use the Trust Fund for the benefit of the beneficiary.
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These are often favourable with people who wish to consider the needs of a loved one when securing their future. For example, children and people who are not able to make their own decisions through injury or illness.
The purpose of such Trusts is to safeguard assets where the beneficiary is not able to enjoy the benefit of the asset straight away. Generally, this is due to the beneficiary being a child or someone who has a mental health condition, which prevents them from having control over their own finances and decision making. The Trust is made by the settlor (the creator of the Trust), who will grant a discretionary power to the Trustee/s of the Trust to release the Trust Funds at the Trustees discretion. The beneficiary has no powers. Often the Settlor will be a parent or close family member and may also want to be the Trustee to enforce the safeguarding of the asset and ensure the Trust Fund benefits the beneficiary as intended.
Disabled Discretionary Trusts
Disabled Discretionary Trusts are popular if any of your children or relatives has a mental health condition, which would amount to a disability. Such conditions are usually caused through brain and spinal injuries or medical conditions affecting the brain and central nervous system. This type of Trust is popular as the Trust Fund is not taken into account when calculating means tested benefits, including that of government funded residential care. This is because the Trust Fund belongs to the Trust and not the beneficiary. The beneficiary will benefit from the Trust for specific needs at the Trustees discretion during the Trust Period. However, if a Trust is not in place and such a disabled person inherits sums from an inheritance, then these funds will belong to the beneficiary directly and thus can be taken into account as an income and as such can be calculated for any means tested benefit. A Disabled Discretionary Trust also attracts tax relief and can therefore, be an effective way of safeguarding funds for a loved one who has a mental health condition, removing the stress and anxiety from the settlor.
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