The importance of the right advice when it comes to vulnerable relatives

When it comes to protecting vulnerable individuals it is important that people obtain the right advice. There are a range of options, with tax and inheritance implications where the right guidance can ensure vulnerable individuals are both protected and provided for.

Who might be considered a vulnerable person?

A vulnerable person can be classed as someone who:

• Isn’t mature
• Isn’t financially sensible
• Lacks capacity to deal with financial affairs
• May be good with money but has their finances ‘means tested’ for benefit purposes.

An example scenario

‘Sarah’ has learning disabilities. She used to live with her parents but decided she wanted to live independently so moved into sheltered housing. This gave Sarah her independence; it provided her with the support and supervision she needed as and when as required.

To pay for her accommodation, Sarah received benefits, Local Authority funding and Personal Independence Payments (PIP).

Sarah has a huge passion for steam engines. She lives, breathes and dreams of steam engines, and will do all she can to go and see them. This passion has seen her travel across the country on various occasions to see famous engines.

Sarah’s parents encourage this passion. Upon their death they would like to leave Sarah some money so she can continue to enjoy the thrill steam trains give her. They also want to leave money to Sarah to help maintain her and ensure she is looked after, but don’t want this inheritance to impact on the means tested benefit she receives.

What options do Sarah’s parents have?

It’s only right that Sarah’s parents go and see advice from a professional who could advise them of the best routes to take and why.

Some routes the parents shouldn’t consider include:

• Leaving all of the money to Sarah’s brother. Leaving the responsibility on her brother to ‘see her right’ can lead to problems for Sarah. Firstly, the parents are relying on the brother’s integrity to provide for his sister. Secondly, this leaves the inheritance they left their son at risk of any issues that could affect his wealth. These issues include divorce, creditors, being spent etc.
• Creating a Deed of Variation.
• This can have tax implications, but could also be classed as ‘deprivation’ with regards to the care Sarah receives in sheltered housing. The Deed of Variation would be included in the means tested benefit which could result in Sarah receiving a reduced payment or losing this benefit altogether.

So, what should Sarah’s parents do?

In this scenario, the best option for Sarah and her parents would be to place any inheritance into a Discretionary Trust. Ideally a Disabled Discretionary Trust, as this would protect Sarah’s means tested benefits.

There are also tax advantages available to Sarah if this is the route chosen by her parents.

If you would like to speak to a Wills and Probate expert ring us on 0203 488 3997 or email us at info@ashtongrace.co.uk.

Ashton Grace – Specialists in Peace of Mind