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 the capacity to deal with financial affairs
  • Maybe good with money but has their finances ‘means tested’ for benefit purposes.

An example scenario

‘Yolanda’ has learning disabilities. She used to live with her parents but decided she wanted to live independently so moved into sheltered housing.

This gave Yolanda her independence, and provided her with the support and supervision she needed as and when as required.

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

Yolanda 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.

Yolanda’s parents encourage this passion, and upon their death would like to leave her some money so she can continue to enjoy the thrill steam trains give her.

They also want to leave money to Yolanda to help maintain her and ensure she is looked after, but don’t want this inheritance to impact the means-tested benefit Yolanda receives.

What options do Yolanda’s parents have?

It’s only right that Yolanda’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 Yolanda’s brother.  Not putting the money into a Trust for Yolanda, and leaving the responsibility to her brother to ‘see her right’ can lead to problems for Yolanda.
  • a) Firstly, the parents are relying on the brother’s integrity to provide for his sister.
  • b) 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.
  • Create a Deed of Variation. This can have tax implications but also be classed as ‘deprivation’ with regard to the care Yolanda receives in sheltered housing. The Deeds of Variation would be included in the means-tested benefit which could result in Yolanda receiving a reduced payment, or losing this benefit altogether.

So, what should they do?

In this scenario, the best option for Yolanda and her parents would be to place any inheritance into a Discretionary Trust. Ideally, a Disabled Discretionary Trust, as would protect Yolanda’s means-tested benefits. There are also tax advantages available to Yolanda if this is the route chosen by her parents.