When advising clients wanting to leave gifts to beneficiaries who may be vulnerable or disabled there are a number of things to take into account. It is also important to consider that although a beneficiary may not be vulnerable or disabled at the time the Will is made, consideration should be given at the regular reviews of the Will to make sure that the gift is correct but also the beneficiary’s circumstances have not changed.
Things to Consider:
The personal position of the beneficiary, are they vulnerable, would they be a “target” if they inherited an amount of money? Would they be able to manage a sum of money?
The financial position of the beneficiary, are they currently in receipt of any benefits? Are those benefits means tested? Will receiving a sum of money have an impact on the benefits received?
Will the beneficiary benefit from the intended gift or will it cause them more harm than good both from a financial and personal point of view?
Types of Gift:
Specific gift
A specific sum of money or specific item. There is a risk with this as it could affect the financial position of the beneficiary and may impact on the benefits they receive. There is also no protection from third party predators who may take advantage of the beneficiary if they become aware the beneficiary has inherited a sum of money.
Residuary gift
The whole or a share of the residue of the estate. Again, there are the same risks as above. The residuary estate is usually a substantial sum of money which will almost definitely have an impact on any benefits received. The risk of third party predators may also be an issue.
With both of the above, whilst benefits may be affected when the inheritance is received, should the funds run out the beneficiary may be able to make an application for them to be renewed however there is no guarantee they would be reinstated or how long this would take.
Trust
The Will could create a “disabled persons Trust” leaving either of the above type of gifts to Trust, this means that the funds are ringfenced and there is additional protection for the beneficiaries as they would never have the funds in their sole name.
Having a Trust in place would be the most secure way to protect funds for a vulnerable or disabled beneficiary. Trustees would be appointed and they would look after the funds for the benefit of the beneficiary. The beneficiary would still be entitled to receive their benefits and would have the use of funds via the Trustees as and when they needed.
If there were concerns about third party predators coercing the beneficiary to give or spend money on them the beneficiary would not have direct access to the funds, the Trustees would act as a “gatekeeper” to the funds and release them only at times when they believe that it is only the beneficiary benefitting or pay for things directly for the beneficiary.
Review
It is important to review all Wills regularly, we recommend every 5 years or when there have been changes to your circumstances, consideration should also be given to the beneficiary’s circumstances as well as to the remainder of the Will.
Other Recommendations
Although a Will is a private document you may feel it beneficial to communicate the reasons you have created a Trust so that there is no confusion in the future as to why decisions were made. We would always recommend that a Letter of Wishes is left when a Trust is created to set out your reasons for creating the Trust and to give your Trustees guidance in how you would like them to manage the funds in light of the beneficiaries’ circumstances at the time of your death.