Families who have a relative with a learning disability often use a Disabled Discretionary Trust. These trusts are a way of putting in place financial arrangements to help support the disabled
A Disabled Discretionary Trust can also provide a way of owning a property. Sometimes families decide that in the long-term they would like to be able to set up arrangements that allow their relative to continue to live at home with the necessary support.
Disabled Discretionary Trusts are used:
Although Disability Living Allowance is not means tested, Income Support and possibly other benefits such as Housing Benefit stop being paid altogether if a person has more than a certain amount of money held in their name (currently £16,000.00). Benefits are withdrawn or reduced if savings exceed a lower level.
If Social Services fund a residential care place or care package they may also begin to charge for the care service or stop funding it if an individual holds more than £23,250.00. In these circumstances they may not get any financial assistance.
Once assets are put into the Disabled Discretionary Trust they belong to the Trust, not the person intended to benefit. He or she may receive gifts or even payments from the Trust but they cannot be said to have any rights to the assets themselves, since there are always a number of other potential beneficiaries who could, at least in theory, benefit from the trust. Another way of looking at this is that any Authority assessing the finances of the person can’t see the contents of the trust as being owned by the person, since the person has no rights to the trust fund and the trust fund could be gifted to any of the other beneficiaries.
Trusts hold and invest assets. This can include the family home. It may provide a means of managing and maintaining a property. This is particularly useful when the person lacks legal capacity i.e. sufficient understanding to enter into a contract. Trusts are normally set up as part of drawing up a Will.
Trustees will operate the trust. These can be other family members, friends or professionals. Key points about the Disabled Discretionary Trust are:
Trustees have discretion as to how the assets are used and the trustees are free to make all of the decisions
The person to benefit from the Trust must not have a right to the income or capital
The intended beneficiary must not be the only person named in the Trust i.e. must not be the 'sole' beneficiary
Without these features the Disabled Discretionary Trust is not properly constituted and the person may be treated as though they own the house or have the money.
It is important not to leave a disabled child out of a Will as the Will may be contested by Social Services under the Inheritance (Provision for Family & Dependents) Act 1975. As noted above if a direct gift is made the beneficiary may well not be able to administer the funds and the injection of cash is likely to harm benefits, which might otherwise have been fully available.
Disabled Discretionary Trusts also enjoy privileged tax treatment when compared to normal Discretionary Trusts and as such are not subject to 6% periodic & exit charges.